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Gary Shapiro: Washington’s Gain Is The Nation’s Loss

July 28, 2010

This is the first installment of a two-part series running this week. Government “Stimulated” Jobs Enrich D.C., But They Hurt All of US Almost every week I experience a tale of two cities as I travel from Washington, D.C., to Detroit to see my wife and toddler son. For Washington, it is the best of times. Today’s U.S. Department of Labor numbers reflect that the Washington area’s 6.4 percent unemployment is the lowest of any large area in the nation. Washington area home prices are up nine percent. The Washington economy is super-charged by the inflow of new federal government money and the legal and lobbying business generated by a government proposing and issuing new laws and rules. Even the quiet mission of Washington associations is growing as Americans realize that vital interests are at stake as the federal government rushes to legislate and regulate. Americans outside Washington are paying more to Washington experts to explain lengthy 2,000-page bills as well as multitudes of proposed rules coming from the federal government. More than 10,000 lobbyists are formally registered to lobby the federal government (and this certainly understates the number who lobby but do not meet the 20 percent lobbying threshold before formal filing is required). Interest groups, including unions, businesses and the AARP, reported spending $3.5 billion to influence the federal government in 2009, and likely a higher amount will be reported in 2010. Washington litigators will soon flood the D.C. federal courts with lawsuits in a desperate attempt to stave off new federal rules harmful to business. American Bar Association statistics reveal that the number of “active, resident” lawyers in Washington, D.C., jumped from 46,689 in 2008 to 48,456 in 2009. This is the second highest increase in the nation with only New York adding more lawyers. (Washington, D.C. now has one lawyer for every 12 D.C. residents! This is more than ten times the rate of the next most-lawyered state, New York, which has one lawyer for every 127 citizens). Why the large increase in lawyers and lobbying? The Obama Administration and Congress have been legislating and regulating to a degree never seen before in most of our lives. This has fueled the Washington economy making it the nation’s healthiest metropolitan area by almost every definition. And the Washington boom will continue as the federal government hires thousands of new employees to meet the mandates of the health care and financial “reform” bills. The Washington area is among the wealthiest in the country. It has thousands of million-dollar-plus homes and is awash in imported luxury cars and high-end stores. Forbes.com reports that six of the ten wealthiest counties in the nation surround Washington, D.C. The average family makes six figures in a few Washington area counties. It is the best of times for many in the Washington area. For Detroit, and virtually every other major U.S. metropolitan area, it is the worst of times. The unprecedented number of “for sale” signs, high unemployment and flaccid business environment, tell a tale of decline. The relative opulence of Washington compared to the distress of the rest of the country epitomizes a challenged nation. More, it is difficult to find any American business executive who is not concerned about the prospects for the U.S. economy. Corporate America not only has reversed its natural optimism, many believe the federal government is making it worse. If the Republican leadership does not seek to retake Congress on a pro-jobs platform outside the Washington Beltway, a mile-wide window of opportunity is being missed. Business owners who create jobs are frustrated. They don’t understand why Washington is making life more difficult for them. They are perplexed with new requirements like the health-care law mandating every business report to the IRS information on any purchase exceeding $600. They see all sorts of federal payroll taxes rising next year, and they don’t understand why American corporate taxes are the second highest in the developed world. A dozen national business leaders I met with Tuesday agreed that their represented industries have been hurt by the well-meaning efforts of the federal government to help the economy. The complex stimulus packages, bail-outs, health care and financial “overhaul” laws combined with a hyper-regulatory environment give their industries little confidence to hire or invest in the United States. Heap on threats of tax increases, new rules, an increasingly restrictive union agenda and a protectionist environment, job creators view the federal government’s recent activism as harmful. An anti-free market and anti-employer environment has their industries looking at overseas investment for growth. Business executives from large and small companies view the United States as an increasingly hostile place to do business. The lack of business confidence, investment and jobs creation is not surprising given how our political leaders have demonized the very businesses whose investment, profits and growth create jobs. The word “corporate” is too often combined with the word “greed.” Profits are considered evil or excessive. The “free market” has shifted from a positive description of the American economic system to pejorative. The “invisible hand” of the free market is being replaced entirely by a visible hand of what politicians think a market should look like. Our American edge in entrepreneurial activity and innovation is threatened by our own government. New burdens and taxes are being added without considering real business and job creation implications. We have to pivot quickly to make this the best of times for every American, not just for those of us lucky enough to be part of the Washington economy. Later this week, I will provide specific suggestions on what needs to be done to reverse the Washington anti-jobs, anti-business agenda. These suggestions will not increase the deficit and will improve the economy and create productive jobs. Gary Shapiro is the president and CEO of the Consumer Electronics Association.

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Bill Scher: Attention Sturgis Bikers: Your Sponsor, Harley-Davidson, Is Hoarding Cash And Killing Jobs

July 27, 2010

In two weeks at the 70th Annual Sturgis Motorcycle Rally , hundreds of thousands of bikers will have a chance to send a message to Harley-Davidson, Inc. and its fellow irresponsible corporations: Stop hoarding profits. Create jobs. Support America. Milwaukee-based Harley-Davidson Inc. tries pretty hard to be seen as the all-American company. But its business practices are not exactly patriotic. As the New York Times reported, Harley-Davidson had a $71 million profit last quarter, yet it’s shrinking its workforce by more than 20% — killing about 3,500 jobs. America needs profitable corporations to invest in America’s recovery. Instead Harley-Davidson is suffocating it. Meanwhile, Harley-Davidson continues its PR efforts to brand itself as part of the fabric of America, by sponsoring the famous Sturgis biker rally. Harley-Davidson is even touting a 5-day ride from the Harley-Davidson Museum in Milwaukee to the rally in South Dakota with the company’s top executives, including CEO Keith Wandell . The same Keith Wandell quoted in the New York Times article saying despite rising profits, hiring new workers is “the last thing we’re worried about …”. Biker blog Ride Like You Mean It minced no words in describing Harley-Davidson’s business practices: … for a 100+ year-old company which made so much from brand loyalty and labelling–and so little from engineering and quality control–it is galling. It is orphan-grade chutzpah to so lavishly reward Wall Street through devastating and empoverishing the union workers who builds their products. This shows such an incredible disconnect between the public face of H-D and its business strategy that it defies comprehension. Frankly, I hope all the good, hard-working, hard-riding H-D owners will take a good long hard look at what H-D has become–reflected in its utter comtempt for the middle class–before they send another dime in the direction of Milwaukee. There are plenty of alternatives available to what was once an American icon, but is now just another metastatizing tumor, a corporatist cancer sucking the lifeblood from our country. Sturgis bikers: is that the company you want representing your finest event? If you are frustrated over the weak American economy, and angry at the lack of support for manufacturing in America, next month’s Sturgis rally is a chance to send a message while the world is watching. Whilte at Sturgis, signs, buttons, YouTube videos telling Harley-Davidson to stop hoarding profits and create American jobs, will not only send a message to Harley-Davidson, but to all the irresponsible corporations that, as the New York Times reported, are ” focusing on cost-cutting to keep profits growing [with] the benefits … mostly going to shareholders instead of the broader economy. … [Their] focus remains on keeping profits high, not rebuilding work forces decimated by the recession.” The perception of Sturgis is that its attendees are mainly conservative. (Sen. John McCain got a roaring reception in 2008 when he suggested his wife could win the rally’s annual topless beauty pageant .) But the issue of irresponsible corporations hoarding cash while millions of Americans need jobs is not an ideological one. I’d go even farther and suggest that conservatives who don’t want our government to carry the load of American recovery should demand that the private sector take the lead. Harley-Davidson has every right to run its business as it sees fit. But we have every right to make sure it can’t polish it’s all-American brand while stiffing American workers and stifling the American economy. Originally posted at OurFuture.org

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Richard (RJ) Eskow: Elizabeth Warren and Her Discontents

July 26, 2010

Somebody really, really doesn’t want Elizabeth Warren to run the new Consumer Protection Financial Bureau, or “CFPB,” which she first envisioned and proposed. Who? The big banks, for sure, as well as others who don’t want their misbehavior brought to light. And Tim Geithner, whose vision of Wall Street and its problems is fundamentally different from Warren’s. There are others, too — ideologues like Megan McArdle of the Atlantic , who has made something of a cottage industry out of attacking Warren on specious grounds. The President’s attempting to split the baby when it comes to appointing Ms. Warren, but the facts and public perception are aligned and present him with a stark reality: He must choose between appointing Ms. Warren or placating the big banks. There is no Third Way. Unfortunately for the President, Elizabeth Warren is a yes or no question. The ideological opposition to Warren’s appointment is usually grounded in the false notion that the relationship between, say, a bank and a lender, is a symmetrical exchange between equals taking place in a mythical “free market.” They’ve failed to heed the lesson taught by Freud in Civilization and its Discontents : “Civilization … obtains mastery over the individual’s dangerous desire for aggression by weakening and disarming it and by setting up an agency within him to watch over it, like a garrison in a conquered city.” An agency outside the individual is necessary to a well-functioning civilization, too, especially when confronting an oligopolistic banking system with a history of fraud and predation. There have been at least two empty and ineffective lines of attack against Elizabeth Warren: The first is that she’s opposed to “financial innovation,” and the second is that she lacks the necessary “managerial experience.” Ms. McArdle attempts to open a third: That Prof. Warren is a bad scholar. McArdle fails miserably, misquoting or misunderstanding other academic papers and Warren’s own work while failing some basic analytical challenges. She does succeed, however, in showing the lengths to which some will go to block this appointment. Despite the fact that McArdle is ” the business and economics editor for The Atlantic ,” numbers don’t seem to be her thing. She infamously miscalculated the effect of repealing Bush’s tax cuts for each American by a factor of 10 , arriving at $25 instead of $250 per person, and then blithely explained: “The calculator on my computer won’t go into the billions, and I truncated incorrectly. The main point stands; even a very optimistic set of assumptions doesn’t yield huge net benefit.” Actually, $250 for every man, woman, and child in the US — and that’s only for the next two years — is serious money. And as for that calculator problem, Ms. McArdle, there’s only one word for that: spreadsheets. You’ve heard of them, I trust. Spreadsheets are particularly handy when you’re making statements like this: “Does it matter if we have a regulator that can use data consistently? ” In this piece McArdle leans on an old Wall Street Journal anti-tax screed by Todd Wysocki. “More weird metrics for Elizabeth Warren,” her headline quavers. McArdle eagerly repeats Wysocki’s suggestion that family living expenses are actually less than they were in the 1970s. But Wysocki’s stacking the deck (and making a completely different point) by using pre-tax rather than after-tax figures. Warren’s point is that two-earner families have less disposable income today than one-earner families did in the seventies, even with both adults working. She’s right. I used a spreadsheet (highly recommended) to look at the increases in expenses, using the figures Wysocki (and the McArdle) cites. Here’s what I found: Mortgage costs increased from 18% to nearly 20% of after-tax income. Health insurance premiums increased from 3.5% to 3.63%. (That doesn’t include increases in out of pocket expenses like copays and deductibles.) And there was a whopping new expense of nearly 20% for day care, which wasn’t needed with a one-earner family. Add in car payments and the expenses Wysocki cites went from 39% of after-tax income to 62.3% — which pretty effectively underscores Prof. Warren’s point, don’t you think? McArdle saves her real “firepower,” such as it is, for a piece she calls ” Considering Elizabeth Warren, the Scholar .” It’s a blend of deception, misdirection, and poor analysis, chock full of comments like this one about Warren’s book on two-earner families: “… Warren simply fails to grapple with what her thesis suggests … Admittedly, I don’t quite know what to say, but at least I can acknowledge that it’s a pretty powerful problem for the current family model. Warren kind of waves her hands and mumbles about social programs and more supportive work environments. There is no possible solution outside of a more left-wing government.” Got it? McArdle says Warren’s book is a failure because a) Warren fails to solve one of the problems she identifies, b) not that McArdle knows what the answer is, but c) “Warren kind of waves her hands” (get me a rewrite!) and “d) mumbles about social programs etc.” — which means she does propose solutions, but they’re ones that involve e) “more left-wing government.” Which McArdle doesn’t think is the solution, even though she acknowledges that she doesn’t have a solution. Does it matter if we have a “business and economics editor” who can use data … and logic … consistently? McArdle then suggests that Warren doesn’t understand numbers because Warren asserts that (says McArdle) “housing consumption hasn’t increased much … by less than a room per house.” McArdle conclues that this is a “twenty percent” increase, given a starting size of five rooms per house, although if consumption’s gone up by less than a room per house it’s less than twenty percent per house (no calculator needed for that one!) And that’s with two people working full-time instead of one. “The square footage of new homes has increased dramatically since 1960,” writes McArdle. But how much of that is McMansions and other high-end homes? She doesn’t say, presumably because she doesn’t know. Since we’re talking about housing consumption among middle- and lower-income working families, a basic understanding of “mean,” “median,” and “average” would make that kind of information critical to McArdle’s argument. But McArdle’s main line of attack is on the papers that Warren has co-authored on medical bankruptcy. Yet at times she’s not criticizing the paper itself, but what Warren’s co-authors may or may not have told the press. As for the article itself, it’s entitled “Illness And Injury As Contributors To Bankruptcy,” and comes replete with appropriate cautions like these: ” We cannot presume that eliminating the medical antecedents of bankruptcy would have prevented all of the filings we classified as ‘medical bankruptcies.’” Yet McArdle repeatedly claims Warren et al. suggested medical bills were the sole cause of these bankruptcies, then beating this nonexistent claim to death. McArdle also makes the analyst’s most basic mistake — fallacy based on anecdote — by repeatedly saying that by definition “Patty Barreiro” is a “medical bankruptcy” case. Barreiro is the wife of Edmund Andrews, the financial writer who wrote about their own bankruptcy. She’s become a bete noir for all of those who believe that bankruptcy is most commonly a character defect, not an unfortunate combination of circumstances. McArdle’s fixation on her isn’t just bizarre. It’s also bad analysis. The definition Warren et al. use for “medical bankruptcy” is $5,000 or 10% of income, and those are appropriately high figures for anyone familiar with the real world. (McArdle also grossly mis-states the contents of another academic paper, but fortunately this piece does the heavy lifting on that misrepresentation – hat tip Atrios .) For those who argue that Warren lacks managerial experience, I have three words: “Chief Administrative Officer.” Warren understands the mission better than anyone, and she’ll be able to hire someone to handle the logistics. And, as for her alleged hostility to “financial innovation,” there’s no sign of that. Some “financial innovations” destroyed the economy, and she’s right to be a little “hostile” to them. Elizabeth Warren’s view of what needs to be done to fix Wall Street is fundamentally different from Tim Geithner’s or Larry Summers’. Her view is correct — and it’s also more popular politically. The President’s attempt at a “nuanced” solution — that Elizabeth Warren will ” play a role ” even if she’s not appointed to lead CFPB – is a nonstarter. The banks, and the public, would see that decision for what it is: A surrender to financial interests at the expense of the American consumer. The Megan McArdles of this world will wail and gnash their teeth If Elizabeth Warren is appointed, but that doesn’t matter. What does matter is that if Warren doesn’t run CFPB, the same regulators who mismanaged the economy in general – and consumer protection in particular – will still have the upper hand. Any answer but “yes” to the Warren question would be a disaster, both on its merits and politically. You don’t need a spreadsheet to figure that out. _______________________________________________________________ Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light . He can be reached at “rjeskow@ourfuture.org.” Website: Eskow and Associates

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Ron Ashkenas: Take Your Vacation — Please!

July 21, 2010

Cross-posted from Harvard Business Online I have a confession to make: I’m not very good at taking vacations. That doesn’t mean that I don’t take them at all, just that it’s a bit of a struggle. Unfortunately I’m not alone, particularly among Americans. Expedia’s annual Vacation Deprivation survey found that, in 2009, 34% of employed U.S. adults did not take their full allotment of vacation days. What’s worse is that workers in the United States receive fewer vacation days on average than those in any other major country (13 days compared to 15 in Japan, 19 in Canada, 26 in the UK, and 38 in France). I was recently reflecting on this issue during a vacation with my wife in Paris. As we sat in one of the innumerable sidewalk cafés, everyone in the city seemed to be relaxed and on holiday (and given the average number of vacation days given to employees in France, perhaps they were). In contrast, to make sure I used my “time off” productively, I had brought a laptop to work on the plane as well as an iPad and BlackBerry to keep up with emails. So was I relaxed and enjoying Paris? Sure I was — but probably not as much as the Parisians. Naturally during the course of the week, I thought less and less about work and stopped checking my BlackBerry so obsessively. (It also helped that my wife threatened to throw the damn thing in the Seine if I kept looking at it!) By the end of the week, however, I started worrying about all of the unanswered emails and backlog of other work, so by the time we got home I was already anxious about my pending workload — and whatever psychological benefits accrued from the vacation quickly wore off. Then it struck me that it has probably been at least 10 years since I took two consecutive weeks of vacation — a period of time that would perhaps allow me to really unwind and relax. But that also seems to be an American pattern. According to the Expedia survey, in 2009 only 10% of U.S. workers planned to take two full weeks of vacation. A larger percentage planned to take one week and then a few days here and there. Why is it so difficult for me, and many other American professionals and managers, to take significant amounts of vacation, especially when studies show that time away from work actually enhances productivity and health? One reason might be that many of us have bought into the technologically enabled culture of instantaneous response and immediate action. We have to respond to our customers/clients/managers/employees as soon as possible, or else we won’t be perceived as effective or successful or competitive. As a result we’ve become email and IM and text message junkies that complain about the flood of incoming messages, while also feeling the adrenaline rush of constantly getting things done and out the virtual door. Vacation potentially stops the adrenaline rush — sort of like a stint in rehab — so we avoid it or take our addiction devices with us, turning vacation into scaled-down work in a different venue. The second reason that Americans like me constrain our vacations might be that our organizations don’t really encourage time off. Sure, there are official vacation policies and benefits — but there also are projects and task forces and studies and all sorts of other goals that must be addressed. So the subtle message is that you should take vacation — but also make sure that you get all of your work done, and meet your goals without sloughing off your assignments to anyone else. And taking two consecutive weeks of vacation might just leave you too far behind and therefore might not be worth it. A few years ago, when I was a consultant to the World Bank, I remember a note that then-president Jim Wolfensohn sent to all staff members in mid-July thanking them for their hard work during the year and encouraging them to take their vacations. He said that it was important for them to recharge their batteries and refresh their thinking. This attitude and perspective may be common in international institutions and in Europe or other parts of the world. But in the United States, where people even question whether President Obama should take a vacation , it doesn’t seem to be the norm. Perhaps, though, it should be. Maybe it’s time that America catches up to the rest of the world in vacation practices. I know that I’m going to give it a try. What are your thoughts?

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Amy Siskind: The Obama Old Boys Club — Does the White House Economic Team Have a Woman Problem?

July 20, 2010

When FDR devised the policies which led our country out of the Great Depression, he had a secret weapon — his wife, Eleanor. Regrettably, as we struggle our way out of the worse economic crisis since then, Treasury Secretary Geithner is attempting to silence one of the few female voices in leading us out: Elizabeth Warren. This despite ample evidence that having more women in financial leadership, ala Lehman Brothers and Lehman Sisters , is optimal for balancing risk in our financial system. The two men leading our country’s economic policy, Geithner and Larry Summers, seem unwilling and perhaps incapable of working with women. That is why President Obama should not only nomination Elizabeth Warren to head the Consumer Finance Protection Bureau, but also proactively seek to add gender balance to his economic inner circle. Geithner’s opposition to Warren is not his first clash with women in power. One of his first acts in the role of Treasury Secretary was to attempt to push out FDIC Chairwoman Shelia Bair. As Rep. Barney Frank observed : “I think part of the problem now, to be honest, is Sheila Bair has annoyed the ‘old boys’ club…we have several regulators up in the tree house with a ‘no girls allowed’ sign…” Geithner’s inability to respectfully interact with women in positions of power was further in evidence when he was questioned in April by the Congressional Oversight Panel. Warren rightfully asked Geithner about AIG’s funneling billions of taxpayers’ dollars to Goldman Sachs: Do you know where the money went? Geithner could barely conceal his disdain: watch his angry, condescending response here . Of course, Warren was correct. Taxpayers did not need to pay Goldman Sachs one hundred cents on the dollar, resulting in Goldman booking a $6 billion dollar gain . Geithner should well know. Also in 2009 under his watch, our government strong-armed creditors of Chrysler into taking massive discounts to their original investments. Like Geithner, Larry Summers has a well documented pattern of not being able to work with and silencing women. In fact, our current economic crisis could have been adverted if Summers had paid attention to Brooksley Born, then chairwoman of the US Commodity Futures Trading Commission. In 1998, Born issued an unequivocal warning to Alan Greenspan, Robert Rubin, and Summers of the risks inherent in not regulating derivatives. Summers was one to silence Born : … “Summers called Ms. Born and chastised her for taking steps he said would lead to a financial crisis.” Michael Greenberger, a senior director at the commission at the time, noted : “Brooksley was this woman who was not playing tennis with these guys and not having lunch with these guys. There was a little bit of the feeling that this woman was not of Wall Street.” Likewise, in 2002, derivatives whiz Iris Mack voiced concerns to Summers about Harvard Endowment Company’s use of risky derivatives. A few months late, Mack was fired . Another woman silenced: another warning of risk unheeded. The problem goes deeper still. President Obama’s economic inner circle includes only one woman: Christina Romer. And of course, it is hardly a secret that tensions are high for Ms. Romer and her all male colleagues, including Larry Summers: Mrs. Romer was joking, she said in an interview, adding, “There are only a few times that I felt like smacking Larry.” Yet few laughed in the president’s presence. One can only imagine. Romer is girl trying to operate in a boys’ club. Which is why it’s time for President Obama to knock the door off of the boys’ club and let the girls into his inner economic circle. We can hardly afford to lose another immensely qualified woman. The opportunity cost to our economic prosperity is simply too great.

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Brett King: Compliance and Social Media – Friends or Foes?

July 6, 2010

A consistent theme keeps popping up as I discuss social media innovations with bankers these days. It is increasingly frustrating for innovators who want to use mobile, social media, the web and other such tools to get these past hyper-risk-adverse compliance specialists. It seems as if many of the banker’s I’m meeting are saying that the favorite word of the compliance officer of today is simply “No”. That needs to change… Compliance holding up social media adoption In a recent American Banker’s Association survey they reported that 74% of participating banks confirmed that all ‘social media efforts were to be vetted by compliance first’. In an environment where minutes matter, and the response is key, such a logjam to social media participation is a frustrating mismatch with the realities of dealing with customers in todays uber-connected world. On Sunday I enjoyed brunch with Matt Dooley who heads up Direct Customer Experience for HSBC’s Commercial team in Asia, and his wife Maria Sit who runs Heath Wallace’s Asia division. Over lunch the issue of culture, compliance, philosophy and the reluctance to experiment to broadly with social media, mobile engagement and other such issues came up. Matt used a brilliant illustration to identify the problematic compliance hurdles we face today as bank innovators. He asked me whether or not a compliance department of a major financial institution would approve “snail mail” as a new initiative if it was proposed today? Let me explain. If snail mail did not exist today, what would your average compliance officer think if you came along and explained you wanted to use this great new technology for distribution of bank material like statements, new credit cards, PIN #’s, etc. You’d have your PowerPoint deck ready to go explain the process where you stuff an envelope, hand it on to someone you don’t know in the bank (likely a very junior staff member), he then puts it in a bag which is picked up by a truck with another person you don’t know, they take it to a large warehouse and sort it according to Geography, etc, etc… There just ain’t no way that snail mail would make it through the compliance check list of today’s modern financial institution. The compliance officers would no doubt quote scenarios like this to justify why it would be absolutely impossible for the bank to consider using this new ‘snail mail’ technology. This is the dilemma. Today there are those of us trying to improve customer experience, knowing full well that compliance departments are citing risk mitigation, regulations and laws, bank policy and procedures, and other such issues as reasons why innovators can’t release a new mobile app, engage in social media conversations in real-time with customers, and so forth. In the meantime, there are existing processes, procedures and systems that are far more riskier than things like social media, but they are immune to the compliance department’s gaze because they are already in place. Is it riskier to do nothing? Let’s take Twitter as an example. Today it’s rudimentary to do a Twitter search on major FI brands to see topics trending that in the old days if they were carried by mainstream media would turn a banker’s hair on end. In many cases, however, such interactions are simply ignored because there are no dedicated resources listening and responding to such social media conversations. The processes internally around getting compliance approval for a formal response simply make any such response useless by the time it is approved. But aren’t social media free form responses risky? Take for example the very public Twitter faux pas recently committed by a Westpac employee who stated “Oh so very over it today…”. Honestly, this is probably about the worst that it could get on Twitter – and it just isn’t that bad. I hear Compliance departments the world over rejoicing and justifying their stance at the next Social Media strategy review meetings – saying, ‘See, see – we told you so!”. The reality is, that this particular faux pas actually ended up humanizing the Westpac team and probably won them new supporters more than anything else… It is far more likely that a serious breach of customer trust, a poor service or policy decision, or some other very public social media trending topic could do far worse brand damage if left unanswered out in the social media conversation. Classic examples are those of Ann Minch with Bank of America and Citibank with the Fabulis debacle . In observing the Facebook and Twitter effect of such PR nightmares, the lack of timely response by the bank across the social media landscape made these issues far more impactful and damaging than they needed to be. So the real risk is in not responding quickly enough. The reality is that banks are increasingly likely to face a major PR disaster and have it escalated more rapidly than they can every imagine through social media networks. Take the example of BP and the recent Gulf Oil Spill – their lack of maturity in handling PR issues over social media has absolutely punished their brand . The spill is bad enough, but BP’s response to the social media conversation has simply made it much worse than it had to be. No amount of brand advertising and traditional PR can ever undo the sort of reputation damage that is possible to your brand in the social media landscape. Compliance as an enabler Compliance needs to understand the negative risk of increasing workload on the frontline in respect of customer service perception, and decreasing the ability of the organization to respond to social media events in real time. They need to start thinking about their function as an enabler of the core business with customers, rather than just risk mitigation. They can also be lobbying regulators to help regulators adapt and make their processes more user-friendly, while retaining security of identity and the assets of the customer. Customer experience is being hampered by compliance heavy processes that look to reduce risk, but make the engagement unnecessarily complex. Translating the Terms and Conditions from a paper application form onto the first 7 pages of a web-based application process might seem legally sound, but is quite ridiculous from a Usability and Customer Experience perspective. Compliance departments need to learn to stop saying no, and be embedded within social media, customer advocacy and customer experience teams so they understand the implications of ‘risk’ and ‘legal’ decisions that actually hamper the organizations ability to respond to customer needs.

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Robert Rosenthal: My Breakfast With Jeffrey

June 29, 2010

Jeffrey Hayzlett is a big, boisterous, pickup truck drivin’, pheasant hunting, South Dakotan cowboy. Part time. Most of the time, he is one of the most successful and well-known marketers in the country, having spent the last four years as the Chief Marketing Officer of Kodak. Hailed as a “celebrity CMO,” you might recognize him from his appearances on The Apprentice . And now he is an author, too, of the recently released business book, The Mirror Test , already in its second printing. We sat down recently to talk about the state of marketing, the state of South Dakota, and the best way to eat pheasant. Robert Rosenthal: Talk about the importance of ‘marketing’ in business today. Jeffrey Hayzlett: It all comes down to one thing: sales. The impact on growing the bottom line of your business. They say in good times advertise and in bad times advertise more — that couldn’t be more true today. Marketing should exist to grow sales and with that comes satisfied customers and greater margins. But let me add one thing: marketing “buzz” is not sales. When people talk to me about buzz, I tell them to buzz their way right out the door. Without specific sales expectations attached, buzz is like a whoopee cushion: a joke that has all the noise and none of the consequences of the real thing. RR: What is the impact of social media on marketing today? JH: In the broadest and briefest stroke possible: speed. Thanks to social networks and technological advances, information can be delivered and feedback can happen from any device, almost anywhere and at any time. But speed is nothing without relevancy. Your messages will never have a chance of getting through and be well received unless they are relevant to the customer or the community you are marketing or responding to. RR: How is that achieved? JH: In social media, relationships matter and those relationships must be maintained with relevant messages that are communicated regularly and authentically. But this is hard work to maintain. A lot of businesses think speed means easy. Not so. Social media is not exercise. You should not do it moderately. You need to drive it, set the tone, and support it or it will cost you more than money. Today if a company is not doing this to engage its customers and team it will fail to keep growing and die. RR: Speaking of speed, talk about the “118″ you write about in The Mirror Test. JH: The “118″ is my version of what some people still call “the elevator pitch.” Problem is that time used to mean three to five minutes. Now, an average elevator ride is about two minutes. But you only have seconds before I tune you out and maybe two minutes after that to completely sell me with your initial pitch. That’s where I came up with the 118. It’s the 118 seconds you actually have to pitch: 8 compelling seconds to hook me and up to 110 seconds to drive it home — less than two minutes with only seconds to spare. The first eight seconds is the length of time the average human can concentrate on something and not lose some focus. It is also the length of time of one of the toughest rides in the world: a qualified ride in professional bull riding. You must hold on as one of the meanest, toughest animals in the world tries to throw you off — just like any good prospect will. And if you make it those 8 seconds, I’ll give you 110 more to drive your message home with no bull. But please: No 30-page PowerPoints. If Moses could present the commandments in two slides, five bullet points each, you can do the same thing with yours. – Jeff Hayzlett RR: Did you learn more from running your own small business or from working at a Fortune 500 company? JH: Both. I’m not trying to be a smartass. I learned the core tenets of the things that were good for business in a small business. I learned the scale at a company like Kodak. I describe it in The Mirror Test , as “just zeroes.” The things that are good in big business are good in small business. There’s just a lot more of them. I learned better techniques and more sophistication in the bigger business and for that I’m very grateful. RR: Like you, I’ve traveled the world and have friends on every continent except Antarctica, but I don’t know anyone from South Dakota. JH: That happens a lot. Now you can say, “I know Jeff.” And that’s the way South Dakota is, that’s what really cool. I will be in England and all of sudden I’ll run into somebody for the first time and they’ll say, “oh, I know this person from South Dakota,” and they’ll tell me and I know who they are. That’s the kind of state that we live in. RR: How did growing up there inform your life experience? JH: A lot of my directness came from that. RR: It’s a very direct place? JH: Well, it’s a very polite place; but we’re really honest and everybody knows everybody and everybody’s business. Ok, I take it a step further and say, we know it, let’s just quit hiding it behind the counter and let’s talk about it. You all know that this guy is the smart guy and that guy isn’t and this guy is the rich guy… let’s not make believe we’re all the same because we’re not all the same. So I think there’s a real directness in South Dakota. It’s a populist state. That’s where the populist movement came from back in the late 1800′s. So it’s a big part of who we are. RR: I don’t see a lot of directness in corporate America today. I don’t know if we’re afraid of it, or for what reason we shun it, but it’s not a part of how companies behave. JH: Well, most companies try to avoid it because directness can cause them liability. So they look at it from a constriction point rather than an expansion point. Growth companies look at those things as an expansion point. With very big growth companies and growth cultures, you see a lot more of that. It’s like a high performance football team. A quarterback should say to the guard, “You missed the block.” We all know he missed his block. Why do we come back to the huddle and not talk about it. Instead, it should be, “Hit that guy next time.” RR: One of the consequences of social media is that, in effect, it forces more directness. JH: Oh, without question. I think because of the nature of the microscope that we live in, everything has become so public. You have to be concerned with what your brand looks like in this very transparent culture. But, if you don’t have something real at the core, then it really doesn’t matter, and that will be exposed very quickly. RR: For example… JH: You can be Apple, but unless you create a really cool product, then you can’t sell it. They happen to have cool products and they sell them at a premium. At one time, it wasn’t that way. And all companies go through that cycle. And that’s one of the key points: I always find companies are real successful when they go back to the core of who they are. RR: What do you want your legacy to be? JH: He was a good person. He helped. He contributed in some way. He’s a valuable member of the team. RR: What trait do you most admire in a person? JH: Openness. Awareness. Receptive to things. RR: What is the best way to prepare pheasant? JH: My favorite is what I call South Dakota Sweet & Sour . Start with pheasant breasts and cut them into thin strips, the smaller the better I think. Dip them in eggs, then coat them with seasoned flour and bread crumbs (or just flour will do) then fry them up just like chicken. I prefer peanut oil myself, but any will work. When done coat them with this special gourmet sweet and sour sauce… ketchup, vinegar, and sugar in equal parts. Take a cup of each and mix together and heat. You can adjust the amounts to your taste, but equal parts of each ingredient is best. Mix and heat then pour it over the fried fowl and you have a great appetizer or serve it up with some rice. Seriously good. RR: Let’s play name association. RR: Trump JH: Driven RR: Lady Gaga JH: Artistic RR: Rush Limbaugh JH: Loud RR: Ann Coulter JH: Shrill RR: Martha Stewart JH: Conglomerate RR: Seth Godin JH: Quirky RR: Ashton Kutcher JH: Cool RR: Steve Jobs JH: Vision RR: What’s your favorite meal? JH: Bone-in rib eye steak, medium rare, salad, and potato. And diet Mountain Dew. I could have that every night. (Note: If his wife is reading this, perhaps I mis-heard. He might have said grilled chicken and steamed vegetables.) RR: You have a motto? JH: Jump off the cliff. No one’s gonna die. RR: What talent would you most like to have? JH: Music. I have no rhythm. I wish I did. I’d be the first one voted off on Dancing With The Stars . Actually, Dance Your Ass Off would be more appropriate. RR: Why buy your new book? What do you hope readers get? JH: Practical advice about asking the key questions you need to survive and thrive in your business. RR: What do you know for sure? JH: That I don’t know what I don’t know. Here’s a link to Jeffrey Hayzlett’s book, The Mirror Test .

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Grant Cardone: Double-Dip Recession Self-Imposed

June 25, 2010

Worsening economy and possible double-dip recession will be self imposed not just economically driven. Clearly the economy continues to be soft at best, validated by record low home sales, but the reality is individuals and companies are just not making the necessary adjustments to make the most of every opportunity that exist. Tax incentives disappear for first time home buyers and housing sales slump. Real estate agents and brokers complain about inventory levels, sellers that are not realistic, banks that won’t lend and buyers that are bottom feeders. While all of that may be true it won’t increase production. When is the last time a real estate agent called you to talk about listing your house? Doesn’t happen. What happens cause the agent to be at ‘effect’, waiting for something to happen to them rather than making something happen because of something they did. Entire real estate industry is waiting for the the government to continue incentives, the banks to free up lending, the seller to call the broker or the buyer to raise their offer. Nothing comes to those that wait except pain! And its not just the real estate business– same issue for autos, furniture, electronics, service industries –you name it and businesses that are still suffering have not yet made the necessary adjustments to survive and prosper in this environment. You can not wait on conditions to change you must change! You can’t wait for your clients to get reasonable or to come to see you or to finally make a decision or to be rational or anything. This is the kind of economy where you have to go to your client base and create transactions. This is a time where you must become completely unreasonable with how to get things done and never wait or make excuses. I was recently trying to make a purchase of a luxury product for my wife who is having a birthday this weekend. I have been mishandled by two companies that sell the very product that I want to buy for her. One is located 3 blocks from me and the other 12 blocks from me. Both were nice but neither did what was necessary to get in front of me and truly service me to a ‘done-deal’. I then found myself on the internet searching information and asking for input on Facebook when a sales person with a company 80 miles from where I live discovers I am in the market and offers to bring me what I want. This is what it takes today. Responsibility to change your conditions and do what ever is necessary. The government can not bail out individuals. Your manufacturer can only make the product so good, so cheap and only offer incentives for so long. Today it takes an attitude of advance and conquer not retreat and wait for things to change. You must be first in the consumers mind today or you will end up last. And when you get there do everything right. While the violent shift in the economy 18 months ago cause many business those the failures that continue from here on out will be mostly self imposed. Anyone that use yesterday’s think and/or approaches will continue to suffer long after this economy recovers. The only way to ensure you don’t experience a self imposed double dip is; 1) decide to expand into the market and take market share 2) do anything and everything that your competitors will not do 3) keep every individual focused on the solution not the problem! Grant Cardone, International Business Consultant and NY TImes Best Selling Author

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Frank DiPascali Auction: Madoff Associate’s Possessions Up For Sale

June 24, 2010

MORRIS PLAINS, N.J. — A public viewing of items to be auctioned from the former home of jailed financier Bernard Madoff’s chief financial officer produced a diversity of agendas from prospective buyers Thursday. Some came in search of bargains, while simple curiosity drew others. Then there was Reenie Harris. “It’s a combination of things, but there’s a certain amount of outrage,” Harris said as she browsed through the belongings of Frank DiPascali that ranged from an ornate table with a built-in chess board to a snowblower and a couple of all-terrain vehicles. “I wanted to experience disgust at these people who blatantly took other people’s money,” Harris added as an explanation of her presence in the drab, humid garage where the items were displayed. “This kind of screams out how appalling the whole thing is.” Proceeds will go to a fund to compensate Madoff’s victims, said the U.S. Marshals Service, which is running the auction at the Morris County Public Safety Training Academy. DiPascali, who was released on bail this week, is awaiting sentencing after pleading guilty last August to money laundering, securities fraud and other crimes that could put him in prison for decades. As part of his $10 million bail package, DiPascali must remain under house arrest and forfeit all family assets, except for an agreed-upon dollar amount directed to be less than $300,000. DiPascali and his wife already have sold three cars and a yacht for a total of nearly $1 million, federal prosecutors have said. It is not clear whether the possessions to be auctioned Friday will equal that amount. Many appeared to be recreational in nature rather than high-ticket goods: Home-theater electronics, a vintage pinball machine, foosball game and video road racing game; plenty of pool or patio furniture, in addition to more formal dining room and bedroom sets. “It looks like they got all his fun stuff,” said Sharon Lee, who said she was looking for a bedroom set for her son. Lee and others said misgivings about buying items connected to an admitted swindler whose crimes remain incomprehensibly vast is balanced by the fact that the money will go to those who were victimized. “I’d be doing my part to see the losers win something, I hope,” said Agnes Gertz, a retiree from Wayne who said most of the furniture on display was either too bulky or too fancy for her tastes. “But at the same time, I now see how ornately people lived on other people’s money,” she said. Prosecutors have confirmed that DiPascali has cooperated in the investigation and that information he has provided has been partly responsible for the charges brought against Madoff’s former director of operations and the two computer programmers. The government said it expects to call DiPascali as a witness if those cases proceed to trial.

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Health Insurance Premiums Jump 20 Percent In Individual Market: Survey

June 21, 2010

INDIANAPOLIS — People who buy their own health insurance have been hit lately with premium hikes that far exceed increases in premiums for employer-sponsored coverage, according to a new survey from the Kaiser Family Foundation. The nonprofit foundation, which is separate from health insurer Kaiser Permanente, said recent premium hikes requested by insurers for individual coverage averaged 20 percent. Some customers were able to switch plans and pay less, so people paying on their own actually wound up paying 13 percent more on average. That tops last year’s average 5 percent annual increase for employer-sponsored family coverage and almost unchanged premiums for employer-sponsored single coverage, though foundation Vice President Gary Claxton said the comparisons come with qualifications. The individual insurance survey asked respondents for their most recent premium increases, and those can happen more or less frequently than the annual increases mostly seen in the group market, he noted. In the online poll, Kaiser queried 1,038 randomly selected people who pay for their own coverage. Individual health insurance premiums generally rise faster than group coverage rates. They can be affected by variables like a person’s age. They also can be affected by rising medical and drug costs and are more vulnerable when a bad economy makes healthy people drop coverage. That can leave an insurer with a higher concentration of sick people who keep coverage because they need it more and thus generate more claims. The market also appears to be cyclical, with a big increase following a couple years of smaller ones, said Robert Laszewski, a health care consultant and former insurance executive who wasn’t involved with the Kaiser study. But even with a sizable average increase, individual premiums still span a wide range from no increases to huge hikes. “There is no real consistency,” Laszewski said. Guy Gooding of Sobieski, Wis., who is 59, said premiums for his and his wife’s health coverage have risen 73 percent from 2007. They now pay about $646 per month, compared with $374 in 2007. He said he has kept up with the increases because he doesn’t want to sacrifice the quality of his coverage. But he’d like more of an explanation from his insurer, Anthem Blue Cross and Blue Shield. “They’re very vague on why the increases have been as much as they have been,” he said. Insurers drew heavy criticism earlier this year after requesting premium increases of 20 percent or more from their individual customers in several different markets. Analysts who follow the insurance industry say reports of those increases helped re-ignite the health care reform debate. Congress then passed in March a reform bill that aims to offer health coverage to millions of uninsured people and help people buy individual coverage through exchanges that will be launched in 2014. About 14 million Americans under age 65 receive health insurance through the non-group or individual market, according to the foundation. In contrast, about 157 million U.S. residents get their coverage through an employer. Kaiser conducted the survey in March and April. The results had a margin of error of 4 percentage points. ___ Online: http://www.kff.org/kaiserpolls/8077.cfm

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Buffett, Gates Press Billionaires to Give Half Their Wealth to Charities

June 16, 2010

By Andrew Frye and Katya Kazakina June 16 (Bloomberg) — Warren Buffett and Bill Gates are pressing fellow billionaires to commit at least half their wealth to charity in an effort to draw attention on the responsibilities the wealthiest have for aiding the needy. Buffett and Gates started a drive called “ The Giving Pledge ” to encourage high-profile philanthropic promises, according to the initiative’s website. A pledge of the majority of an individual’s fortune is “an understandable and quite reachable bar for the wealthiest — many will exceed it,” according to a document posted on the website. Buffett, the world’s third-richest person and chairman of Berkshire Hathaway Inc. , has pledged more than 99 percent of his wealth to philanthropy. The greatest part of his fortune, estimated in March at $47 billion by Forbes magazine, is being given in annual installments to the foundation established by Microsoft Corp. co-founder Gates and his wife Melinda Gates . “Bill and Melinda Gates and I are asking hundreds of rich Americans to pledge at least 50 percent of their wealth to charity,” Buffett wrote today in a pledge on Fortune’s website. Buffett said 1 percent of his wealth is enough for him and his family, and “neither our happiness nor our well-being would be enhanced” by keeping more. The initiative kicked off with a meeting in New York on May 5, 2009, that was organized by the Gateses, Fortune magazine reported, citing interviews with the couple and Buffett. The leaders of the effort may have a minimum goal of about $600 billion in commitments, Fortune said, based on the calculation of half of the $1.2 trillion in net worth of the 400 richest individuals compiled by Forbes magazine. ‘The Giving Pledge’ “It would easily double or triple the amount of philanthropy in America,” said Melissa Berman , president of Rockefeller Philanthropy Advisors, a non-profit organization that has advised the Bill & Melinda Gates Foundation on “The Giving Pledge” initiative. “If we would be able to get this influx for philanthropy from billionaires, it would inspire other Americans,” she said in an interview today. “And then we could really change what the world is like.” The idea to assemble a group of billionaire philanthropists to discuss strategies and encourage giving was Buffett’s, Fortune said. The meeting was hosted by David Rockefeller and included George Soros , Oprah Winfrey and Michael Bloomberg . Bill Gates ranks second on the Forbes list of billionaires. Bloomberg, the mayor of New York, is the majority owner of Bloomberg LP, the parent of Bloomberg News. The Gates Foundation, with an endowment of about $35 billion, combats disease and global poverty, and funds U.S. education initiatives. Those who take the pledge are invited to pick the causes that they fund. The effort will initially focus on U.S. billionaires and may expand to other countries. To contact the reporters on this story: Andrew Frye in New York at afrye@bloomberg.net ; Katya Kazakina in New York at kkazakina@bloomberg.net .

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King Inherits UAW Pushing for Payback After Cuts of Up to $30,000 a Worker

June 15, 2010

By Keith Naughton and Jeff Green June 15 (Bloomberg) — Bob King , the next United Auto Workers leader, inherits a union that gave up thousands of jobs and billions in benefits to save the U.S. auto industry. His legacy will rest on how workers are rewarded in the recovery. King, 63, the nominee of the UAW bloc that has controlled the Detroit-based union since 1946, is slated to succeed two- term President Ron Gettelfinger , 65, in an election tomorrow. The electrician with a law degree, who rose through the ranks in 40 years at the UAW, is set to take over a union that has declined to 355,000 members from 1.5 million in 1979. The UAW shift coincides with signs of recovery in the industry. General Motors Co. posted a net profit and Chrysler Group LLC made money on an operating basis in the first quarter, less than a year after each emerged from bankruptcy. The union helped convince President Barack Obama to provide an $85 billion taxpayer bailout to those automakers, taking concessions to put their labor costs on par with foreign automakers’ U.S. plants. “Bob is facing a very, very difficult job because there will be tremendous pressure on him to roll back the concessions,” said Gary Chaison , a labor professor at Clark University in Worcester, Massachusetts. “He’s got to walk a very fine line to reverse some of what was lost and keep some in place for the promise of a brighter future.” UAW workers have each given up $7,000 to $30,000 in concessions in the last five years, King said last month. The union surrendered raises, bonuses, cost-of-living adjustments and agreed to a two-tier wage system where new hires make about $14 an hour, half what hourly production workers are now paid. Returning Benefits As head of the union’s bargaining with Ford Motor Co., King filed a grievance in January after the automaker reinstated raises, 401(k) matches and tuition assistance for salaried workers. Dearborn, Michigan-based Ford has since restored tuition benefits for its 41,000 hourly workers and King is pressing for more. “UAW members at GM, Ford and Chrysler and throughout the supplier sector have made the sacrifices to keep these companies viable,” King said at a Ford factory in Ypsilanti, Michigan, on May 24. He declined to be interviewed for this story. UAW labor costs, including wages and benefits, have fallen from $75 an hour to about $55, equal to Toyota Motor Corp. ’s U.S. workers. The union has about 113,000 members at Detroit- based GM, Ford and Chrysler, which is based in Auburn Hills, Michigan. “Bob’s going to make sure our members are not forgotten as these companies rebound,” said UAW director Rory Gamble, who runs King’s former Detroit region and has known him 25 years. “But we’ve got to make sure these companies are viable, so there’s going to be a lot of caution in how we go after this.” ‘Vilified’ Union Part of the caution will stem from managing the UAW’s public standing. “The current perception of the UAW is one of the lowest of any union in America,” said analyst David Cole of the Center for Automotive Research in Ann Arbor, Michigan. A so-called jobs bank in which auto workers received almost full pay while on indefinite layoff “became the flag by which the union was vilified,” Cole said. The union doesn’t receive credit for giving up that jobs bank or other reforms, he said. “Bob has to get out front and tell the world it’s a different union than it used to be,” Cole said. “Otherwise, it will continue to decay.” King, the son of a former Ford industrial relations director, has been painted by challengers in the union as going too easy on the company. More than 70 percent of Ford workers rejected additional concessions in November that King endorsed. Ford earned $2.7 billion last year after three years of losses. Critics in Union “We can’t just take at face value when these companies cry poverty,” said Gary Walkowicz , a UAW official from King’s home factory in Dearborn, who is making a self-described symbolic run against him for president. “Workers really disagreed with giving up those concessions when Bob King asked them. It showed there’s a disconnect between the membership and the leadership.” In the next round of contract bargaining in 2011, King has to work toward restoring raises while ensuring the automakers put new models into U.S. factories, said Sean McAlinden , economist at the Center for Automotive Research. “As the market comes back, the automakers will be adding workers by the thousands,” McAlinden said. “If he holds the line on canceling too many concessions, he’ll get growth. Otherwise, the companies will say, ‘We’ll build up Mexico like you wouldn’t believe.’” Business Case King prepares business cases to show managers that hiring more workers at UAW plants can be profitable, said Bernie Ricke, president of UAW Local 600 in Dearborn, who has been at the Ford bargaining table beside King since 2003. “He’s usually very measured, though I’ve seen him pound the table a few times.” Billionaire investor Wilbur Ross negotiated against King on a contract for his International Automotive Components Group, the world’s largest automotive carpet supplier. King studied IAC’s books and discussed findings with managers before bringing the information to union leaders and rank and file members. The new contract, which cut pay and benefits, passed by 80 percent. “He’s the prototype for the kind of labor leader who is needed in this modern world,” Ross said in an interview. “His challenge is to preserve manufacturing in the United States at the same time maintaining a standard of living for the worker. It’s a delicate balance.” King last year approached Ross for help in organizing auto suppliers to support the U.S. cash for clunkers program that funded government subsidies for vehicle trade-ins. They built a coalition of about 50 suppliers across the U.S., and the program eventually helped sell 677,081 cars. From the Sickbed King comes to the table with an “intense” work ethic, Gamble said. He’s been seen working two mobile phones at a time in Ann Arbor, where he lives with his wife and three children. (He also has two adult daughters from his first marriage). The night before stomach surgery last year, King called Gamble from his hospital bed at 11:30 p.m. to check on Ford’s plans to transfer workers among plants. After surgery King was right back on the phone, hoarse from a tube in his trachea, Gamble said. “He could barely talk and I said, ‘Bob you need to get well, man,’” Gamble said. “He was relentless.” He took a similar approach to his schooling. After studying religion and philosophy at College of the Holy Cross in Worcester, King graduated from the University of Michigan in 1968 with a degree in political science. He did a two-year tour in Korea with the U.S. Army and then went to work for Ford in 1970 at the Rouge factory complex in Dearborn that Henry Ford built in the 1920s. In 1972, King began an electrician apprenticeship while earning a law degree in his off-hours. Rapid Rise “While he was still an apprentice, the journeyman skilled tradesmen elected him as their union committeeman, which was unheard of,” Ricke said. “He had to work weekends to finish his apprenticeship.” Raised Catholic, King draws a link between the labor movement’s mission and social justice. At a UAW convention in California in 1989, he bused reporters to a shanty town in Tijuana, Mexico, to show them the squalor surrounding U.S. companies’ border factories. He took a group of labor leaders to El Salvador in 1990 to monitor union elections. King’s greatest challenge may be finding a way to build on his earlier efforts to increase the UAW’s ranks . While leading bargaining efforts a decade ago, he helped diversify the membership by organizing graduate students and casino workers. Johnson Controls King also led a strike at Johnson Controls Inc. in 2002 where he convinced the supplier to sign a neutrality agreement allowing the union to organize its other U.S. plants. Ford, one of JCI’s largest customers, also said it wouldn’t object to the UAW representing workers at the auto supplier. That set a precedent that enabled the UAW to sign up 25,000 auto parts workers that year, according to labor professor Harley Shaiken of the University of California at Berkeley. “Bob King leveraged the good relationship the UAW had with Ford into a broader reach with its suppliers,” Shaiken said. “It was innovative and strategic.” King also reaches out to other unions seeking new strategies for signing up members. “He actually believes in grassroots organizing, which I think came from our organizing backgrounds,” said Leo Gerard , president of the United Steelworkers union, who consults with King on strategies for boosting membership and considers him soft-spoken but “tough as nails.” About 350,000 of the 850,000 Steelworkers in the U.S., Canada and the Caribbean work on products that end up in autos. The UAW can’t keep shrinking and expect to hold the clout that moved a president to rescue GM and Chrysler, Shaiken said. “He’s facing an unprecedented crisis; the status quo is not tenable,” Shaiken said. “To survive the union has to go forward, and Bob needs to be a transformational leader.” To contact the reporters on this story: Keith Naughton in Detroit at Knaughton3@bloomberg.net ; Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net

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`Dead Border’ Thwarts Growth as Chinese Pay Price for Backing North Korea

June 14, 2010

By Bloomberg News June 15 (Bloomberg) — Business is slow at sportswear maker Li Ning Co. ’s store in Tumen, China, says Wang Qian, who sells World Cup-themed athletic shoes emblazoned with German and Italian flags. Across the Tumen River is North Korea, whose closed economy discourages growth in northeastern China, the country’s industrial heartland as recently as two decades ago. Tumen’s annual per-capita gross domestic product, at 16,000 yuan ($2,342), is two-thirds of the national average. Young adults, including ethnic Koreans, are leaving for better opportunities, especially in South Korea. “Most of the people here are over 40, and they’re not the type who buy a lot of sportswear,” said Wang, 22. More than 70 million Chinese who live in provinces on the 1,415-kilometer (880-mile) North Korean border are paying a price for their government’s 60-year alliance with the totalitarian regime in Pyongyang. Trade with South Korea, China’s fourth-biggest commerce partner, is routed toward coastal cities, and projects including a development zone on the Tumen River delta — where China, North Korea and Russia meet — may languish unless Kim Jong Il allows some economic freedom, according to Jin Qiangyi at Yanbian University about 50 kilometers from Tumen. “The border is a dead border,” Jin, an ethnic Korean and director of the Institute of Northeast Asian Studies, said in a telephone interview. While China is encouraging North Korea to open up, it “is refusing. It is very difficult.” Communist Regime One reason is China’s economic and political support for North Korea’s communist regime, which began when China came to North Korea’s aid in the 1950-1953 Korean war. China accounted for 79 percent of the North’s 2009 international trade, according to the Seoul-based Korea Trade-Investment Promotion Agency. China provides almost 90 percent of energy imports and 45 percent of the country’s food, according to a July 2009 report by the New York-based Council on Foreign Relations. Two-way commerce between China and North Korea, at $720 million from January through April, was still about 1 percent of the $63 billion total between China and South Korea, according to Chinese trade data. That gap is evident in Tumen, a city of 136,000 across the river from the North Korean town of Namyang. A group of about 20 peasants could be seen in Namyang through binoculars on June 4, tending a rocky field on the slope of a deforested mountain. A lone cow grazed in the marsh near the river, which flows to the Sea of Japan about 90 kilometers away. Border Shootings Two men ran across the 69-year-old two-lane bridge into China, glancing quickly back at the North Korean side. Hours earlier, three Chinese citizens had been shot dead by North Korean guards near a similar crossing hundreds of miles to the southwest. The guards have been “more tense” in recent weeks, said a 41-year-old Tumen woman hawking North Korean money and pins. They have held up transit of Chinese traders as tensions between the two Koreas rose following the March 26 sinking of a South Korean warship, said the woman, who gave only her surname, Li, because she said she feared being punished for divulging information to a foreign reporter. North Korea said May 26 it would sever all ties with the South following a report by a South Korean-led international panel concluding a North Korean torpedo sank the ship, killing 46 sailors. Near-Empty Streets Tumen’s streets were largely devoid of traffic, and a rock band from the provincial capital of Changchun played to only a scattering of onlookers steps from the Li Ning store. Shopkeepers had a ready explanation: emigration to South Korea by the region’s ethnic Korean population. More than 92 percent, or 1.78 million, live in Jilin, Heilongjiang and Liaoning provinces, with the heaviest concentration in the prefecture encompassing Tumen. South Korean statistics back up their claim. There were 363,087 ethnic Koreans from China living legally in South Korea last year, compared with 310,485 in 2007, according to the Ministry of Justice . Salaries in South Korea are one attraction. A 45-year-old taxi driver surnamed Zhang said his wife obtained a forged marriage certificate showing she was married to a South Korean. She works in a factory there, making air conditioners and earning the equivalent of 10,000 yuan a month, five times his wages. She saves 80,000 yuan a year and plans to return to China soon, he said. Zhang didn’t want to use his full name because of his wife’s illegal means of obtaining a visa. Better Business “There’s nothing to do around here,” said Sun Xiaoyu, a Tumen shopkeeper selling South Korean-made snacks and drinks. “Business would be much better if we bordered South Korea.” North Korea’s 2008 GDP was about 2 percent of South Korea’s $930.9 billion total, according the most recent data from South Korea’s central bank . China has targeted the region for accelerated development in a program called “Revitalize the Old Northeastern Industrial Base.” One goal is encouraging technology companies to open manufacturing facilities, replacing jobs lost a decade ago when state-owned plants were closed in China’s transition to a more market-driven economy. China also should encourage peaceful Korean reunification to help spur growth, Jin said, although the increasing tension makes that a distant prospect right now. “We must just wait,” he said. — Michael Forsythe . With assistance from Bomi Lim in Seoul, Stephen Engle in Beijing and Inyoung Hwang in New York. Editors: Melinda Grenier , Ken Fireman To contact the reporter on this story: Michael Forsythe in Beijing at mforsythe@bloomberg.net

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Ellen Sterling: It’s Been Happening Since Mickey Mouse Was Born: The Business of Licensing

June 12, 2010

Remember the first time you bought a t-shirt with a band’s logo emblazoned across the chest? Or the logo of your favorite soft drink? How about a pair of designer jeans with the designer’s name on the back pocket? A Spiderman lunchbox? Did you have a Star Wars figure in your collection? If you had any, or all of these or, in fact, any similar product that demonstrated your preference for a certain brand then — even if you don’t exactly know how the name or logo got on the object you bought — you are aware of licensing even if the process of getting licensing products to market is a mystery. Now, if you are like I (or like I was until a few days ago) you really don’t care. As long as you can buy that High School Musical lunchbox for a kid who loves the show, it doesn’t matter to you exactly how how the product was tied into the High School Musical brand. But, I learned that the world of licensing is a fiercely competitive one, with almost every brand you can think of involved in licensing as a method of increasing brand recognition. I learned this last week at the Licensing International Expo that was held at the Mandalay Bay Convention Center here in Las Vegas. Walking into the exhibition hall, everything you see is familiar: Disney is right at the entrance and, just behind them is Skechers (this year entering the new arena of TV production with a show on Nicktoons). You see the Cartoon Network, the BBC, all of the major movie studios and a range of movie and comic book characters (Marvel is a big presence). If you move away from the center of the exhibition hall, you’ll find a booth devoted to Elvis and Muhammed Ali. Look! There’s Buzz Aldrin and, over there, is Tony Curtis — both here in person. Aldrin, at 80, has a watch brand and a line of “Rocket Hero” products. Curtis, 85 on June 3, has licensed his art, cardboard figure of himself, a line of painted horse figurines. Those proceeds will go in part to the Shiloh Horse Rescue and Sanctuary, founded by Curtis and his wife Jill. How did all this get started? According to Steven Ekstract (left), group publisher of Advanstar Communications, the company that manages the expo and publishes the trade magazine Global Licensee! , “Licensing began in the 1930s when Walt Disney invented Mickey Mouse and, when he was approached to put the character’s likeness on products, he also invented licensing. In the 50s we had Howdy Doody and The Lone Ranger. “In the 1960s,” Ekstract added, “the fashion guys — Oleg Cassini, Bill Blass — began to license clothing and perfume. Andy Warhol licensed his art. Today, a lot of licensing is coming out of movies, especially from tentpoles (films that serve as the primary support of a studio) and sequels. Warners has the Green Lantern and Disney owns Marvel and all those characters.” Asked what the next big thing in licensing is, Ekstract is quick to answer. “Sports leagues. The NBA will be big because basketball is an international sport today. There are 12 professional teams in China. Baseball is very big in Latin America.” And, now, he says, that the burgeoning middle class in countries like India and China want what we have in the United States in sports, entertainment and fashion. Ekstract points out that, in sports, the US, the United Kingdom and France all have exportable brands. “Except football,” he says. “That is the one sport that doesn’t translate well to other countries.” In addition to brands wishing to be licensed, companies that market brands to be licensed were also at the expo. One with the most intriguing client list is Manhattan-based Brandgenuity. Adena Avery-Grossman, a company managing director and one of the four founding partners, says that “it takes five skill sets to successfully develop a strategy to market a brand.” First, there’s sales. Next you need good legal advice, people to develop products, the licensees and, finally, the retail expertise.” Brandgenuity’s client list includes the World Poker Tour, Atari, Food Network, Pabst, Harlequin Romances, Juilliard, MGM Studios, It’s Always Sunny In Philadelphia, Rodgers and Hammerstein and Really Useful Group, Andrew Lloyd Webber’s production company whose property includes the Phantom of the Opera. To get the most for a brand in the world of licensing, Avery-Grossman says, “We look at the brand from every angle. What is it about? What do people who like the brand expect from it? Where can it go? We study the brand and ask these questions to develop a strategy.” She and Michael George, the Really Useful Group head of merchandising and licensing, agree that musicals — in theater , movies and on TV — is experiencing a real revival of interest. “Look at the popularity of Glee and High School Musical,” she says. “And Broadway is doing so well. “Also,” she adds, “look at Lyric Culture, the fashion line featuring song lyrics. They’re huge.” That Phantom is, after more than a generation on stage, still hugely popular is evidenced in many ways. Not the least of these is the attendance at Phantom Fan Week last autumn at The Venetian in Las Vegas, where a new production of the show, 95 minutes long, opened in 2006. Fans attended the event from across the US and Canada, Europe and, even China. “Now,” Michael George says, ” Love Never Dies, the sequel to Phantom is playing in London and will open on Broadway in 2011. There are so many [licensing] possibilities.” What trademarks can we expect to see more of in the future? Well, LIMA , the industry licensing trade group, reports that, even at $5.2 billion in 2009, revenue is down 8.7 percent from 2009, so we can expect more characters from every entertainment segment. The licensing future is full of movie sequels and remakes ( Gunsmoke, The Thing, Star Trek, Kung Fu Panda and the thirtieth anniversary of Star Wars, among them. “Licensing,” as Steven Eckstract points out, “has limitless potential.”

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Warren Buffett Lunch Sells for a Record $2.63 Million in Charity Auction

June 11, 2010

By Andrew Frye and Dakin Campbell June 12 (Bloomberg) — Warren Buffett ’s lunch auction rose to a record of $2.63 million in the 11th annual charity fundraiser. That’s about 24 percent higher than the previous record, set in 2008 when hedge-fund manager Zhao Danyang of Hong Kong paid $2.11 million. The chance to have lunch with the celebrated billionaire investor drew nine bidders and 77 bids, according to EBay Inc. The online auction started June 6 and ended at 10:30 p.m. New York time yesterday. The winning bidder wishes to remain anonymous, according to Denise Lamott, a spokeswoman for the auction beneficiary, the Glide Foundation in San Francisco. Buffett, the 79-year-old investor who is chairman and chief executive officer of Berkshire Hathaway Inc. , has raised about $8.56 million with the auctions to help the Glide Foundation , which serves meals to the needy. A group led by Courtenay Wolfe of Salida Capital won last year with a bid of $1.68 million. “It’s actually a remarkable calibration of his value,” said Jeff Matthews , author of “Pilgrimage to Warren Buffett’s Omaha” and founder of hedge fund Ram Partners LP. “It measures what people think his worth to them is.” Buffett’s insights on markets attract the attention of those looking for clues on his investment strategy. Past auction winners have said topics of discussion also included corporate governance and philanthropy. The top bidder gets to bring seven guests for lunch at Smith & Wollensky , the New York steakhouse. Stock Picks Buffett’s stock picks and takeovers turned Omaha, Nebraska- based Berkshire from a failing textile mill to a $180 billion seller of bricks, power and insurance. Tens of thousands of people gather in Omaha each year at Berkshire’s annual meeting to hear Buffett expound on the economy and public policy. Buffett’s fortune was estimated at $47 billion by Forbes magazine in March, placing him behind telecommunications investor Carlos Slim and Microsoft Corp. co-founder Bill Gates in the worldwide rankings. In 2006, Buffett pledged 85 percent of his Berkshire holdings, a commitment valued at about $37 billion at the time, to the Bill & Melinda Gates Foundation and charities of four of his family members. The Gates donation is being made in annual installments, and will continue after Buffett’s death. The charity, established by Gates and his wife, combats disease and global poverty, and funds U.S. education initiatives. Glide, which says it serves almost 1 million meals annually, was a favorite charity of Buffett’s first wife, Susan Buffett , who died in 2004. Glide Lunch With Warren Buffett Results: Year Winner Winning Bid 2000 Anonymous $25,000 2001 Anonymous $18,000 2002 Anonymous $25,000 2003 David Einhorn , Greenlight Capital $250,100 2004 Jason Choo, Singapore $202,100 2005 Anonymous $351,100 2006 Yongping Duan, California $620,100 2007 Mohnish Pabrai , Guy Spier , Harina Kapoor $650,100 2008 Zhao Danyang , China $2,110,100 2009 Salida Capital, Canada $1,680,300 Source: Glide To contact the reporters on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net ; Andrew Frye in New York at afrye@bloomberg.net .

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Robert Siciliano: Replacing Stolen Passports and Credit Cards When Traveling

June 11, 2010

Travel season is upon us. Summertime is all about exploring new and exciting places. It’s the season of planes, trains, automobiles and … criminals. When you are out of your element and unsure of your surroundings, you are at a higher degree of risk. Travelers need to be on high alert for property crimes and identity theft. Years ago, before my wife was my wife, she was traveling in Spain. She got off the plane, headed for the rental car terminal, rented her car, and drove off the lot. At the first stop sign, a man knocked on her passenger window and pointed, saying, “Tire, tire.” She put the car in park and walked over to the passenger side. The tire was fine and the man was gone. So she got back in the car and found that her purse had disappeared from the front seat. Her driver’s license, passport, cash, and credit cards were all gone. What a nightmare! When she went to the police, they asked, “Were you a victim of the flat tire scam?” You’d think the rental car agency could have warned her. But the lesson here is that you cannot rely on others to protect you. You are ultimately responsible for your personal security. Fortunately, she is a resourceful person and was able to handle the crisis quickly and efficiently. If your passport is ever lost or stolen in a foreign country, you can apply for an emergency replacement at the nearest embassy. Generally you’ll need to show up in person, and it helps to have a traveling companion to vouch for you. The embassy will need to see some type of verification of your identity, and they’ll likely request a copy of the police report. When traveling, consider carrying your essential documents in a money belt or one that hangs from a lanyard around your neck, hidden under your shirt. You should always carry photocopies of your identification, but they won’t do you any good if they’re stored in the same purse that was just snatched from your rental car. One smart option is to scan all your pertinent documents in full color and upload them to a secure web-based encrypted digital vault. Some of these services are free, while others charge a small fee. In a pinch, you can download the necessary document from any computer with Internet access, and print a new copy. For more information on coping with a lost or stolen password, see this list of frequently asked questions . A lost or stolen credit card requires a different course of action, and its effectiveness largely depends on your preparation. Before traveling, call your card issuer and inquire about their policy for replacing a card. Pack a copy of your credit card that includes the front and back impression. If your credit card is lost or stolen, call the issuer and cancel the card as quickly as possible to mitigate any losses. In the best case scenario, the company should issue a replacement card and ship it overnight at no charge. Most card issuers will accommodate you, and if you find out ahead of time they won’t, find another card issuer. In an emergency, you can always ask a friend or family member to wire you money. When a U.S. citizen encounters an emergency financial situation abroad, the Department of State’s Office of Overseas Citizens Services (OCS) can establish a trust account in the citizen’s name to forward funds overseas. Upon receipt of funds, OCS will transfer the money to the appropriate U.S. embassy or consulate for disbursement to the recipient. The State Department’s travel website offers more details on emergency money transfers . And always be sure to carry some spare cash. Tuck it in that money belt so even if your purse or wallet is stolen, you’ll be in good shape. Robert Siciliano, personal security and identity theft expert adviser to Just Ask Gemalto , discusses travel security on Fox News. ( Disclosures )

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New Hips Gone Awry Expose U.S. Kickbacks in Doctors’ Conflicts of Interest

June 11, 2010

By David Armstrong June 11 (Bloomberg) — A stabbing pain in the hip forced Mark Hirschbeck to abandon his post at third base during an April 2003 game between the Arizona Diamondbacks and the Colorado Rockies. He was 42, among the best umpires in professional baseball and unwilling to quit a job that paid more than $350,000 a year. Dr. John Keggi offered a hip replacement that could get him back on the field by 2004, Hirschbeck says. That didn’t happen. The ceramic joint made by Wright Medical Group Inc. shattered, leading to an infection and four more surgeries that left Hirschbeck permanently sidelined. He later learned that Wright paid tens of thousands of dollars to a foundation Keggi helps run and gave him a trip to a conference in the Bahamas. Keggi recommended the ceramic device over the kinds of implants used in 97 percent of cases. “He was in bed with Wright and picked their product,” says Hirschbeck, who is suing the company and the surgeon, alleging Wright’s product was defective and Keggi failed to install it correctly. “It’s disgusting it would come to that.” Wright’s professional agreements with surgeons are under investigation by the Justice Department, according to filings with the Securities and Exchange Commission. It’s not clear whether the payments to Keggi were improper or are being examined by prosecutors, who declined to comment. The company and the doctor have denied the allegations in the umpire’s suit. ‘Truly Extraordinary’ The government declared last year that it had overhauled the financial relationships between surgeons and the biggest makers of knees and hips, saying the threat of criminal prosecution for “kickbacks” had forced them to slash payments to physicians. Results of the crackdown were “truly extraordinary,” said Christopher Christie , a former U.S. attorney for New Jersey who is now governor, in testimony to Congress in June 2009. It was too good to be true. Compensation ended up being higher after the September 2007 deferred prosecution agreement because payments were postponed, according to data compiled by Bloomberg and interviews with seven surgeons. “It’s back to business as usual,” says Charles D. Rosen, president of the Association for Medical Ethics, who is a spine surgeon in Irvine, California. “Nothing will change until someone goes to jail. It’s a big game.” Prosecutors in the New Jersey U.S. Attorney’s Office, which headed the case, reported a “satisfactory completion” in March 2009 of the probe of Biomet Corp., Johnson & Johnson ’s DePuy unit, Smith & Nephew PLC, Zimmer Holdings Inc. and Stryker Corp. Payments in 2008 fell to $105 million from $272 million the year before, the Justice Department lawyers said. ‘Common Happenstance’ The companies increased doctor compensation for 2008 to about $300 million, according to the data compiled by Bloomberg from reports posted on the device makers’ websites. Fees for 2008 were delivered in 2009, the surgeons say. Payment delays were “a common happenstance,” says Teresa Ford, a Seattle attorney who represents 150 doctors who have consulting or royalty agreements with orthopedic device makers. “None of them had significant changes in their relationships.” The government numbers were lower than those reported by the companies because Justice Department officials didn’t count payments made to buy out the consulting contracts of some physicians, says Michael Drewniak, a spokesman for Christie, a Republican who resigned in December 2008 to run for governor. A “large number” of implant makers paid to end multiyear arrangements, Drewniak says, because they might not comply with new standards under the settlement. $300 Hips “We weren’t just making up numbers,” Drewniak says. Justice Department officials declined to comment. The reports on the company websites don’t specify whether any payments were to buy out contracts. The financial ties between device makers and surgeons help explain why health-care costs in the U.S. rose at 2.5 times the rate of inflation in the past 10 years and account for a sixth of the economy. The $300 million works out to $300 for each of the 1 million hips and knees implanted in Americans in 2008. The payments show how hard it is for government to hold down costs in a system where pricing is opaque and largely unregulated. In the $14 billion-a-year orthopedic device business, payments to doctors squelch competition, says Chad Rodine, a partner in Castle Rock, Colorado-based Echelon Consulting LLC , which advises hospitals on implant costs. Four Times Higher Hip and knee list prices have increased 5.6 percent so far this year, on top of a 130 percent increase in the average selling price of a hip between 1996 and 2008, according to Orthopedic Network News , a trade journal that tracks costs. In the U.S. in 2010, the average price of a primary artificial hip was $7,200, more than four times the $1,600 in Germany, says Melissa Hussey, a senior analyst on the orthopedic team at Millennium Research Group , based in Toronto. In Germany and other countries, she says, sales representatives have restricted access to surgeons. “These items are ridiculously expensive, and a lot of the monies in that bucket are to keep the surgeon tied to that product,” Rodine says. He figures about half the price charged for devices can be traced to funds companies pour into persuading doctors to pick their goods. Device makers work to form bonds early, in medical school, where they underwrite residency programs, or buy books, or sponsor fellowships. Later, they pay surgeons as consultants, speakers or instructors. Sales Rep’s Car Company sales representatives attend operations. The reps enjoy wide access to surgeons at a time when some hospitals are moving to limit the interactions that pharmaceutical representatives have with doctors. Academic medical centers, including Stanford University and Yale University, restrict when and where drug company salespeople can visit doctors, and ban them from patient areas. The connection between device makers and surgeons is hard to break, says Jeffrey Lerner , chief executive officer of the ECRI Institute in Plymouth Meeting, Pennsylvania, which collects pricing data. “The relationship between the manufacturer and surgeon is so deep,” Lerner says. “The first thing they want to see when they pull into the hospital in the morning is their manufacturer representative’s car.” As joint replacements became more complex and numerous, implant makers increasingly relied on surgeons to help them develop new products and train colleagues. Physicians became involved in testing new implants. ‘Routinely Violated’ “Engineers don’t know how to do it,” says Joseph Zuckerman , an orthopedic surgeon at NYU Langone Medical Center who has worked as a consultant. “Advances in the design of orthopedic devices would not be possible if physicians were not part of the development process.” Along the way, according to government investigators, the system was perverted so that many consulting deals, royalty agreements and trips to conferences were intended not to develop better products but to persuade surgeons to use a company’s products. The government charged that the industry “routinely violated the anti-kickback statute by paying physicians for the purpose of exclusively using their products.” Federal prosecutors began looking into the incentives in 2005. The government’s settlement was with the five companies that make 95 percent of artificial hips and knees. They agreed to an 18-month monitoring plan. Four of the producers also paid $311 million in fines to settle civil complaints filed under the Federal False Claims Act. Stryker was monitored, not fined. Ashcroft’s $52 Million Since the agreement, payments to surgeons have been appropriate and for legitimate purposes, according to spokespeople for the five companies. Wright says on its website that it adheres to industry ethical standards in its dealings with consultants. As for 2008 fees that weren’t delivered until 2009, three of the companies say they froze payments while monitors were reviewing contracts with surgeons to ensure they were proper. Spokesmen for Stryker and Smith & Nephew declined to comment. Three of the court-appointed monitors say they’re barred from talking about the details of their work. The two others, including former U.S. Attorney General John Ashcroft , didn’t return telephone calls. The department declined to release reports the monitors filed. ‘Paying the Price’ A month after the government closed its case, Zimmer CEO David Dvorak told analysts on a conference call that the action didn’t result in a “material change” to what it pays surgeons. Warsaw, Indiana-based Zimmer is the largest implant maker, with 2009 revenue of $4 billion. Christie was criticized by some members of Congress for appointing Ashcroft, his one-time boss, to monitor Zimmer. Zimmer said then that it would have to pay Ashcroft’s consulting firm as much as $52 million, and complained about the amount. The biggest change from the settlement is more paperwork, surgeons say, because they have to document in greater detail the work they do. Some say companies have been stricter with entertainment expenses and have cut the number of meetings at resort locations. “No one is really paying the price,” says U.S. Representative Bill Pascrell Jr ., a Democrat from New Jersey. Deferred prosecution deals “don’t work.” In June 2003, Hirschbeck says, a Wright salesman was in the operating theater when his ceramic hip was installed at Waterbury Hospital in Connecticut, which the former umpire says he was stunned to learn later. “I didn’t know this guy,” he says. “What right does he have to be there?” 2001 World Series Back then, Hirschbeck says, he knew next to nothing about artificial implants or the companies that make them. Stout, of medium height and with a fondness for flat-top haircuts, he loved his job, and just wanted to find a way to do it pain-free. He’d had his moments in the baseball sun. He umpired two World Series, including in 2001 when he became part of the story in game 2 between the New York Yankees and the Diamondbacks. In the 8th inning, Hirschbeck called Yankees third baseman Scott Brosius out on strikes. The Yankees were being shut out. An irate Brosius was soon in Hirschbeck’s face, and a photo of the confrontation ran in sports pages. “I was about to throw him out,” says Hirschbeck, whose bother John is also a Major League umpire. He didn’t. Brosius backed off and the Yankees lost the game 4-0 and the series 4 games to 3. “It was the most pressure I ever felt. One bad call could ruin your entire winter.” Cortisone Shots After joining the major leagues following an eight-year tour in the minors, he was reaping the rewards. But getting into position behind home plate was starting to mean a jolt of piercing pain in his hip, he says, akin to being stabbed with a sharp knife. Cortisone shots provided temporary relief. Then pain forced him off the field in Phoenix, and he started doing his homework on orthopedic surgeons. His choice of John Keggi of Middlebury, Connecticut, was motivated not just by Keggi’s reputation — “I heard he was the best in the state,” Hirschbeck says — but by the notion that he could recuperate close his own home in Shelton, Connecticut. While some others recommended metal implants, Hirschbeck says Keggi pushed a new ceramic hip from Wright. “I will have you back on the field within a year,” Hirschbeck says Keggi told him. Keggi, in a deposition taken in Hirschbeck’s lawsuit, said he told Hirschbeck the replacement “may allow you to return to work” and that the ceramic hip “had the best chance of lasting the longest.” Splintered Pieces Less than two months after surgery, Hirschbeck was on the couch, watching TV, when he heard a pop. The pain was intense; the hip had shattered. On July 26, Keggi opened the patient up, picked out the splintered pieces and installed another ceramic implant. Within a month, Hirschbeck was back on the table. This time, an infection had developed; Keggi washed the joint out and removed infected tissue. The pain didn’t go away, Hirschbeck says, and he his wife decided to seek out a new doctor, visiting the Hospital for Special Surgery in New York City, which performs the most replacements in the U.S. A specialist there told Hirschbeck his hip was infected, he says, and delivered an additional jolt of bad news: Fixing the problem would mean taking out the joint and putting in a temporary spacer loaded with antibiotics. That would stay in until the infection cleared. Hirschbeck consented. $344,813 Bill For all of September and most of October in 2004, he lay in a hospital bed in the family room. Nurses visited daily to administer additional antibiotics. His wife emptied his bed pan. When he returned to New York in the back of his van in late October to receive yet another hip, he got a combination of components from Zimmer and Waldemar Link GmbH & Co. That operation, his fifth in 16 months, was successful. There are an estimated 80,000 revisions of hip and knee replacements in the U.S. each year in which an artificial joint is removed because it is causing pain, became loose, failed or is limiting a patient’s mobility, according to a study published in 2007 in the Journal of Bone & Joint Surgery. The bill for all his repairs was $344,813, Hirschbeck says, mostly covered by workers’ compensation. In September 2005, Hirschbeck sued Keggi and Wright in Connecticut Superior Court. Keggi’s lawyer, Eugene Cooney, says in an e-mail that his client “has denied these claims and intends to fight them.” Keggi declined to comment. ‘Cooperating Fully’ Officials with Wright, which has denied liability, won’t answer questions about Keggi, Hirschbeck or its products while the suit is pending, according to Tom McAllister, assistant general counsel for the Arlington, Tennessee-based company. It’s the sixth-largest hip and knee maker, with revenue of $487.5 million last year. Wright is “cooperating fully” with the Justice Department probe that began with a December 2007 subpoena, according to a May 5 filing with the SEC. It’s “probable” there will be a settlement that may require a payment of about $8 million, the company says in the filing. Keggi, in a deposition, said Wright had given grant money, though he didn’t know how much, to the Keggi Orthopaedic Foundation, where he said he is director of research and his uncle, Kristaps Keggi, is president. “The Keggi foundation was paid nominal sums by various product manufacturers to collect data on the results of hip replacement surgeries,” Cooney says. Keggi and his uncle, also an orthopedic surgeon, jointly owned the practice at the time of Hirschbeck’s ceramic implant. Bahamas Conference Kristaps Keggi was a clinical investigator for the trial by Wright to get its ceramic hip approved for sale in the U.S. The Wright website features testimonials from two patients of Kristaps Keggi touting the company’s ceramic hip. John Keggi said in his deposition that he attended a Wright conference in the Bahamas and brought his wife. He couldn’t remember the dates or details, according to his deposition. Keggi said the Wright salesman at the time for Connecticut, Scott Fitzgerald, was usually in the operating room to instruct him on the installation of implants. In his deposition, Fitzgerald said that before joining Wright, he had worked in the ski industry and sold outdoor power equipment. Keggi no longer uses the Wright ceramic hip, having switched to a joint made by Smith & Nephew , he said in his deposition. Last year, Smith & Nephew paid Keggi $25,001 to $50,000 for consulting work and reimbursed him for $7,061 in travel and meal expenses, according to financial records posted on the company website. The company’s physician-consultants are “compensated fairly” and their input is “central to the development and introduction of new orthopedic medical device technology,” says Andrew Burns, a spokesman for London-based Smith & Nephew, in an e-mail. The company is the fourth largest hip and knee maker with revenue of $3.8 billion last year. In Ansonia, Connecticut, Hirschbeck lives alone, collecting disability from the league, about 40 percent of his former pay. His marriage ended in divorce, partly, he says, because of the stress of his multiple surgeries. “I’m miserable,” he says. “It screwed up my life big- time.” To contact the reporter on this story: David Armstrong in Boston at darmstrong16@bloomberg.net

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Lunch With Buffett Attracts Bid of $51,000 on Charity Auction’s Second Day

June 7, 2010

By Andrew Frye June 7 (Bloomberg) — Warren Buffett ’s annual lunch auction, a chance to clink Cherry Cokes with the world’s third- richest person, drew a high bid of $51,000 in the second day of the weeklong charity event . The auction on EBay Inc. generated 18 bids by 4:30 p.m. in New York, according to the website. Bids typically surge in the sale’s final hours. Last year’s winner, a group led by Courtenay Wolfe of Salida Capital, paid $1.68 million, 20 percent less than the 2008 winner as the recession crimped charitable donations. Buffett, 79, rose to prominence through five decades of investing success. Since the financial crisis, his celebrity has grown as his Berkshire Hathaway Inc. prospered without a U.S. bailout and the billionaire defended Goldman Sachs Group Inc. from public criticism. Guy Spier , who won the auction in 2007, has used his association with Buffett to make business contacts, such as a wealthy man Spier dined with last month. “He wanted to meet the idiot who’d had lunch with Buffett for that amount of money,” said Spier, a principal at hedge fund Aquamarine Funds LLC whose bidding team paid $650,100. “I think the return on the investment is really quite high. I’ve met so many people I wouldn’t have otherwise met.” ‘Learn From the Master’ Wolfe of Toronto-based Salida said last year her lunch date with Buffett was a “once in a lifetime opportunity.” Greenlight Capital Inc.’s David Einhorn , who won the 2003 auction with a $250,100 bid, said at the time that he made the purchase to support a good cause and “learn from the master.” The auction has raised almost $6 million over the past decade for San Francisco-based Glide Foundation , a favorite charity of Buffett’s first wife, Susan Buffett , who died in 2004. She volunteered at the organization, which says it serves almost 1 million meals annually to the homeless and poor. No bids were made last night after the auction began at 10:30 p.m. New York time. Bidding concludes June 11. Buffett’s insights on markets attract the attention of those looking for clues on his investment strategy. Berkshire’s investments in financial firms have increased pressure on Buffett, the chief executive officer, to discuss the financial crisis, assign blame and recommend remedies. Barack Obama , during his successful 2008 presidential campaign, turned to Buffett for advice on the economy. So did the architects of the U.S. financial rescue program. In the days before American International Group Inc. needed the first installment of a government bailout valued at $182.3 billion, the insurer’s then-CEO called Buffett for help, which he declined to provide. Defending Goldman Sachs Buffett, who injected $5 billion into Goldman Sachs during the depths of the crisis, became one of the bank’s most visible advocates amid public outrage over the firm’s pay practices and conduct with customers. Last month, he told a crowd of 37,000 people at Berkshire’s annual meeting in Omaha, Nebraska, that Goldman Sachs wasn’t to blame for client losses and disputed the reasoning behind a U.S. regulatory lawsuit against the investment bank. Goldman Sachs denies wrongdoing. The investment pays Berkshire $500 million a year, or, as Buffett boasted to shareholders, about $15 a second. The 2008 transaction also gave Buffett’s firm warrants for the bank’s common stock that have a paper profit of more than $1 billion, based on Goldman Sachs’s closing price of $138.68 today on the New York Stock Exchange. On June 2, Buffett appeared before the Financial Crisis Inquiry Commission and defended Moody’s Corp. against criticism that the New York-based ratings firm misled investors about the quality of mortgage-linked securities during the housing boom. Berkshire is Moody’s biggest shareholder with a 13 percent stake. Cherry Coke Diet His fortune was estimated at $47 billion by Forbes magazine in March, placing him behind telecommunications investor Carlos Slim and Microsoft Corp. co-founder Bill Gates in the worldwide rankings. Buffett’s stock picks and takeovers turned Berkshire from a failing textile mill to a $174 billion seller of bricks, power and hurricane insurance. Berkshire’s profit rose 61 percent to $8.06 billion last year. In 2006, Buffett pledged 85 percent of his Berkshire holdings, a commitment valued at about $37 billion at the time, to the Bill & Melinda Gates Foundation and charities of four of his family members. The Gates donation is being made in annual installments, and will continue after Buffett’s death. The charity, established by Gates and his wife, combats disease and global poverty, and funds U.S. education initiatives. Berkshire is the biggest shareholder of Coca-Cola Co. and in a 2006 letter to investors Buffett attributed a clean bill of health in part to a diet featuring its soft drinks. “It’s amazing what Cherry Coke and hamburgers will do for a fellow,” he wrote.

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Lunch With Buffett Attracts Bid of $51,000 on Charity Auction’s Second Day

June 7, 2010

By Andrew Frye June 7 (Bloomberg) — Warren Buffett ’s annual lunch auction, a chance to clink Cherry Cokes with the world’s third- richest person, drew a high bid of $51,000 in the second day of the weeklong charity event . The auction on EBay Inc. generated 18 bids by 4:30 p.m. in New York, according to the website. Bids typically surge in the sale’s final hours. Last year’s winner, a group led by Courtenay Wolfe of Salida Capital, paid $1.68 million, 20 percent less than the 2008 winner as the recession crimped charitable donations. Buffett, 79, rose to prominence through five decades of investing success. Since the financial crisis, his celebrity has grown as his Berkshire Hathaway Inc. prospered without a U.S. bailout and the billionaire defended Goldman Sachs Group Inc. from public criticism. Guy Spier , who won the auction in 2007, has used his association with Buffett to make business contacts, such as a wealthy man Spier dined with last month. “He wanted to meet the idiot who’d had lunch with Buffett for that amount of money,” said Spier, a principal at hedge fund Aquamarine Funds LLC whose bidding team paid $650,100. “I think the return on the investment is really quite high. I’ve met so many people I wouldn’t have otherwise met.” ‘Learn From the Master’ Wolfe of Toronto-based Salida said last year her lunch date with Buffett was a “once in a lifetime opportunity.” Greenlight Capital Inc.’s David Einhorn , who won the 2003 auction with a $250,100 bid, said at the time that he made the purchase to support a good cause and “learn from the master.” The auction has raised almost $6 million over the past decade for San Francisco-based Glide Foundation , a favorite charity of Buffett’s first wife, Susan Buffett , who died in 2004. She volunteered at the organization, which says it serves almost 1 million meals annually to the homeless and poor. No bids were made last night after the auction began at 10:30 p.m. New York time. Bidding concludes June 11. Buffett’s insights on markets attract the attention of those looking for clues on his investment strategy. Berkshire’s investments in financial firms have increased pressure on Buffett, the chief executive officer, to discuss the financial crisis, assign blame and recommend remedies. Barack Obama , during his successful 2008 presidential campaign, turned to Buffett for advice on the economy. So did the architects of the U.S. financial rescue program. In the days before American International Group Inc. needed the first installment of a government bailout valued at $182.3 billion, the insurer’s then-CEO called Buffett for help, which he declined to provide. Defending Goldman Sachs Buffett, who injected $5 billion into Goldman Sachs during the depths of the crisis, became one of the bank’s most visible advocates amid public outrage over the firm’s pay practices and conduct with customers. Last month, he told a crowd of 37,000 people at Berkshire’s annual meeting in Omaha, Nebraska, that Goldman Sachs wasn’t to blame for client losses and disputed the reasoning behind a U.S. regulatory lawsuit against the investment bank. Goldman Sachs denies wrongdoing. The investment pays Berkshire $500 million a year, or, as Buffett boasted to shareholders, about $15 a second. The 2008 transaction also gave Buffett’s firm warrants for the bank’s common stock that have a paper profit of more than $1 billion, based on Goldman Sachs’s closing price of $138.68 today on the New York Stock Exchange. On June 2, Buffett appeared before the Financial Crisis Inquiry Commission and defended Moody’s Corp. against criticism that the New York-based ratings firm misled investors about the quality of mortgage-linked securities during the housing boom. Berkshire is Moody’s biggest shareholder with a 13 percent stake. Cherry Coke Diet His fortune was estimated at $47 billion by Forbes magazine in March, placing him behind telecommunications investor Carlos Slim and Microsoft Corp. co-founder Bill Gates in the worldwide rankings. Buffett’s stock picks and takeovers turned Berkshire from a failing textile mill to a $174 billion seller of bricks, power and hurricane insurance. Berkshire’s profit rose 61 percent to $8.06 billion last year. In 2006, Buffett pledged 85 percent of his Berkshire holdings, a commitment valued at about $37 billion at the time, to the Bill & Melinda Gates Foundation and charities of four of his family members. The Gates donation is being made in annual installments, and will continue after Buffett’s death. The charity, established by Gates and his wife, combats disease and global poverty, and funds U.S. education initiatives. Berkshire is the biggest shareholder of Coca-Cola Co. and in a 2006 letter to investors Buffett attributed a clean bill of health in part to a diet featuring its soft drinks. “It’s amazing what Cherry Coke and hamburgers will do for a fellow,” he wrote.

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Tech Lifts San Francisco Home Prices as Ocean View Gets 26 Bids

June 7, 2010

By Dan Levy June 7 (Bloomberg) — Rebounding technology stocks and limited housing supply are lifting San Francisco real estate as buyers compete for properties and drive up prices. Sales of houses and condominiums in San Francisco jumped 50 percent in the first quarter from a year earlier and the median price rose 5.4 percent to $685,000, according to a multiple listings analysis by Terradatum Inc. House values will gain 7 percent this year, the biggest annual increase since a 9 percent advance in 2005, Rosen Consulting Group forecast last month. “San Francisco has conditions of very restricted supply and lots of things that can push demand: an attractive climate, innovative economy and high quality of life,” said Harvard University economist Edward Glaeser , who has studied U.S. housing bubbles . The city and metropolitan area has ranked first or second among the most-expensive U.S. housing markets for 19 of the past 20 years, according to data compiled by the National Association of Realtors. The San Francisco Bay Area’s focus on technology and exports make the region an early beneficiary of the U.S. recovery, said Stephen Levy , director of the Center for the Continuing Study of the California Economy in Palo Alto. Prices for existing single-family homes rose in 60 percent of U.S. cities in the first quarter, the Chicago-based Realtors group reported last month. San Francisco metro area values increased 16 percent in March from a year earlier, the biggest jump of any city in the S&P/Case-Shiller home-price index. The 20-city composite measure climbed 2.3 percent. A Dozen Bids Hyuck Jae Lee and his wife, Seung Hye, beat a dozen other suitors last month for a three-bedroom, 1,400-square-foot (130- square-meter) house in San Francisco’s Inner Richmond, a half block from Golden Gate Park with its museums and meadows that stretch to the Pacific Ocean. The couple won by offering 14 percent above the asking price after losing a nearby home that sold for $875,000. “We feel like we’re stepping into our San Francisco life,” said the 38-year-old Silicon Valley engineer, who works at a chipmaker in Sunnyvale, about 35 miles south. Lee looks forward to playing in the park with his seven-year-old daughter and taking bicycle rides in the city, he said. There are factors that may slow housing gains throughout the U.S., including the expiration of homebuyer tax credits and end of the Federal Reserve’s purchase of mortgage bonds, Robert Shiller , Yale University economist and co-creator of the home price index, said in a May 25 interview. Debt Crisis A prolonged debt crisis in Europe could batter stock portfolios and stall San Francisco’s rebound, said Kenneth Rosen , a University of California economist and chairman of Berkeley-based Rosen Consulting Group. He gives that scenario a 20 percent chance and said low U.S. interest rates will probably offset any volatility. Limited availability of jumbo loans that finance the city’s high-priced homes may also drag on the upturn, said Joshua Rymer, chief executive officer of Sonoma, California-based Terradatum, which sells a monthly analysis to the San Francisco Association of Realtors. Jumbo mortgages are larger than government-supported Fannie Mae and Freddie Mac can finance, from $417,000 in most places to $729,750 in high-cost areas. Citigroup Inc. led a $222 million sale of jumbo-backed securities in April, the first private offering of the debt in more than two years. There were more than $200 billion of the securities issued every year from 2003 to 2006. “We’re in trouble if someone doesn’t start up that part of the market,” Rymer said. Technology Jobs Even with the concerns, high prices are to be expected in a 47-square-mile (122-square-kilometer) city surrounded by water on three sides, Glaeser said. Less than a third of San Francisco’s 361,213 dwelling units are single-family residences, and condominiums account for 12 percent, according to the city planning department. Apartments make up half the total. A revitalized technology industry “almost certainly” drove the creation of 1,200 new jobs in the city from February through April, said Ted Egan, chief economist in the San Francisco controller’s office. “I wouldn’t go nuts, but I would expect to see more improvement,” Egan said. “Hospitality and restaurants, health care and education are continuing to grow, and those are the things you’d expect to pull us out of the recession.” The Standard & Poor’s Information Technology Index has jumped 21 percent in the past 12 months, outpacing a 13 percent gain in the broader S&P 500 Index. Six of the top 10 members of the technology measure are based in the Bay Area, including Cupertino-based Apple Inc. and Mountain View-based Google Inc. Lack of Supply Real estate bubbles conclude with smaller price gains in cities with elastic supply, or more room to build, than in inelastic markets, Harvard’s Glaeser wrote with Joseph Gyourko and Albert Saiz of the University of Pennsylvania in a 2008 paper. That’s because elastic cities build extra supply, causing a glut that push values down, the economists wrote. A city such as Houston, with an abundance of land, “tethers prices to reality,” while San Francisco’s geographic barriers and global appeal keep values high, Glaeser said. “In supply-constrained and highly attractive markets there is no natural landing point for prices,” he said. Katherine Yung and Kevin Brandstetter understand that concept. They were the top bidders out of 26 offers for a 1,600- square-foot house in the Golden Gate Heights neighborhood, going $162,000 over the asking price. The three-bedroom home has ocean views, an updated kitchen and borders on a small park. It’s quieter than their old apartment. “Maybe we way overbid, but we came up with a number that was worth it for us,” said Yung, 33, who met her husband in medical school in St. Louis. “Now that we’re in California, it’s nice to see the ocean and the mountains.” To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net .

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Manisha Thakor : The Hard Times Guide to Retirement

June 6, 2010

The most common personal finance question I’m hearing from people of a surprising array of ages is this: “Is it possible for my golden years… to really be golden?” The one, two, three punch of the housing, stock, and job markets has left millions reeling. Thankfully, there is some good news. And here to deliver it is Mark Miller , author of the newly released book, The Hard Times Guide to Retirement . Mark, what prompted you to write The Hard Times Guide to Retirement ? I’ve been covering retirement and aging for more than five years. Before the economy crashed, I was struck often by the lack of planning, preparation and thought that my generation–baby boom boomers–has given to retirement. Now, the Great Recession has made the planning gap much more critical. I wrote the book hoping to give people looking ahead to the next part of their lives the first examination of retirement issues in the post-crash economy. I wanted to show how strategies for money, work and living can be interwoven and leveraged for retirement security-even in tough times. I also hope to help readers boost their retirement I.Q.s by showcasing the best thinking I’ve been able to find in my reporting on retirement and aging. What was the most surprising thing you learned in researching this book on retirement? One of my major themes is that the traditional notion of retirement–hanging it up at age 65–will be discarded, and not only for economic reasons. But I was surprised–and really amused–to learn where that notion of age 65 came from. Otto Von Bismarck, the chancellor of Germany, started the first system of social security in the 19th Century. He initially set the German retirement age at 70, and later adjusted it to 65. When FDR started the American Social Security system in the 1930s, he looked to the German program as a model. That’s where the idea of retirement at age 65 got its start, and it has stuck with us ever since. Of course, people didn’t live nearly as long then as they do now, and 65 has really become somewhat irrelevant, I think. If a reader could just take away one concept from The Hard Times Guide to Retirement , what would you want that to be? There are no magic bullets or easy solutions to the problems we face with retirement security. But there are many solid ways to achieve a satisfying, secure retirement, even in difficult times. These aren’t get-rich-quick investment gimmicks or schemes to make millions working part-time from your kitchen table. I think the best ideas focus on basic blocking and tackling–getting the most from the financial tools already at hand, and making smart decisions about work and lifestyle. Also, I want my readers to focus on the definition of retirement security. It’s not just about what happens this year or next, but finding a way to reliably generate income to support a retirement that could well last 25 years or more for you or your spouse. Boomers are going to need to start focusing on what lies ahead–and get smarter about retirement–quickly! What is your favorite free online retirement calculator? Actually, I’m not a big fan of most free retirement calculators. A recent study by actuarial experts on retirement calculators shows that many of the free online tools have serious flaws that can lead to serious miscalculations when you’re plotting your retirement. The Society of Actuaries analyzed 12 retirement calculators created by financial services firms, software companies, nonprofits, and government for consumers and financial planning pros. All but one of the six consumer calculators was free-and they had a lot of problems. For example, most of the free calculators do a poor job projecting your Social Security benefits. They also use questionable rate-of-return assumptions on investments. And they don’t handle longevity questions or inflation very well. One exception is ESPlanner , which was developed by Larry Kotlikoff, an economist at Boston University. There are free and premium versions of this tool available to consumers. Unlike many of the freebies, ESPlanner gathers more detailed data, and experts on this have indicated to me that it can give you a more reliable forecast. Outside of that, I wouldn’t use the free tools for anything beyond getting a very general idea of where you stand with your retirement planning. Making a precise plan requires one of the more sophisticated software programs that you pay for, building your own spreadsheet or hiring a financial planner. Did you find any of your own personal financial habits (or attitudes) changing as a result of writing this book? Well, speaking of financial planners . . .The biggest change for me came from writing the chapter “How to Hire a Financial Adviser.” This chapter sorts through the alphabet soup of the myriad designations you can find for different types of advisers, and also the different ways that they are compensated. I’m in my mid-fifties, and my wife and I have been diligent retirement savers over the years–but we never really had a retirement plan. Writing this chapter pushed me into action, and we hired an adviser this year to help us build a plan. My research convinced me that the best way to go in this area is to hire a fee-only planner. Unlike advisers who work on commission, fee-only advisers aren’t registered reps for any particular financial services company. Usually, they are self-employed Registered Investment Advisers or work for a firm of independent planners. You pay all the fees, but the planner has no bias toward any one product or solution. I’ve been really pleased with the process, and it’s given me much more confidence that we can meet our goals. Which was your favorite chapter to write and why? I had the most fun writing the chapter titled “Making a Difference: Encore Careers.” It examines how mid-life Americans are reinventing their careers with a social purpose in mind. The Encore Career concept comes from Civic Ventures, a not-for-profit think tank and incubator for social entrepreneurship co-founded by Marc Freedman and John Gardner in the late 1990s. Gardner, who died in 2002 at age 89, was a visionary thinker and leader on civic engagement, civil rights, and social reform. He wrote extensively on leadership and self-renewal, and he co founded Experience Corps, the national organization that promotes and enables volunteer work for older Americans. Freedman is one of the country’s leading thinkers on how Americans can redefine the second half of life with a sense of social and individual renewal. This chapter was really fun to write because I had a chance to interview and profile a number of people who have created Encore Careers for themselves–an aerospace exec who transitioned to teaching in gang-ridden Los Angles high school, an auditor who went to work for the IRS, and a college teacher who now runs a non-profit that helps refugee immigrants adjust to life in the U.S. I found their stories fascinating and inspiring. I also really enjoyed writing the chapters on doing volunteer work and lifelong learning for similar reasons–I really love telling the stories of people who are taking action and getting things done! If you could give a woman in her 30s or 40s just one piece of “retirement advice” what would you say? I’d urge younger women to confront the fact that they are greater risk of retirement insecurity than men–and take steps to fight back. Unfortunately–and outrageously–women earn less over the course of their lifetimes than men. That reduces their contributions to Social Security and retirement savings plans. Caregiving for aged parents or children often interrupts their careers. And women are less comfortable dealing with their finances than men, which makes them more conservative investors at a younger age–at a time when they should be investing aggressively. Even for middle-class or affluent women, the risks are high. Single elderly women are the largest segment of Americans living in poverty. In 2007, 20.5 percent of unmarried women age 65 and older had income below 100 percent of the federal government’s definition of poverty–far higher than rates experienced by men or married couples, according to Census Bureau data. I urge younger women to get educated about retirement security, and to build a plan at the earliest possible date. When you’re job-hunting, be sure to pay attention to retirement benefits, and crank that into your decision-making about what job to accept. It’s also important to start saving for retirement at the earliest possible date, either in a tax-deferred account like a 401(k) or a Roth IRA. I think Roths can be especially beneficial for younger investors. Finally, focus on debt management, not just investing! In particular, try to avoid building up big credit card balances, because they can eat even the best retirement plan alive. How do you plan to spend your retirement? I don’t anticipate having a traditional retirement. I hope to do a mixture of work and leisure as long as possible. I’m already in my own Encore Career, which should make that possible–after working for years at large media companies, I’m now an independent writer, and I also do some consulting work helping non-profit organizations with their online strategies and websites. When I decide that I want more down time, I expect to simply adjust that mix. My areas of interest outside of work include distance bicycling, tennis, playing guitar, traveling and doing volunteer work in the non-profit sector. To read a sample chapter of The Hard Times Guide to Retirement , CLICK HERE . To get more wisdom from Mark, follow him on Twitter at @RetireRevised

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BP Spill Hits Florida, Fouling Beaches, Silencing Hotel Reservation Lines

June 6, 2010

By Mary Jane Credeur and Kim Chipman June 5 (Bloomberg) — More clumps of oil washed up on Florida’s Pensacola Beach overnight, and local officials said hotels and restaurants aren’t getting reservation phone calls as the BP Plc spill hits the state’s tourism industry. About 400 people are working to clean up tar balls that have come ashore, triple the number from yesterday, and an additional 100 are being trained, BP spokeswoman Lucia Bustamante said today at a press briefing in Escambia County in northwest Florida. A large sheen of oil with thick patches of “tar mats” was about 1 mile to 7 miles off the shore from Pensacola Beach, county officials said. Florida officials and tourism industry executives are juggling two missions, working to protect the shore from oil spreading from the April 20 spill in the Gulf of Mexico while assuring tourists that the state’s 825 miles (1,327 kilometers) of beaches remained safe so far. Hotels relaxed cancellation policies for wary guests while updating photos on websites to show beaches that remained pristine. “I’ve talked to hoteliers and it’s not so much that there are cancellations — it’s the reservations line,” Grover Robinson, chairman of the Escambia County Commission, said today at a press briefing. “The phone just isn’t ringing.” 80 Million Tourists Florida draws about 80 million visitors a year, bringing in $60 billion and making tourism the state’s No. 1 industry, according to Kathy Torian, spokeswoman for Florida’s tourism office in Tallahassee. Tourism accounts for almost one-quarter of the state’s sales-tax revenue, she said. Of Florida’s 19 million residents, almost 1 million work in tourism, Torian said. While more and larger tar balls were washing ashore today in some places, including Perdido Key to the west of Pensacola, state and local officials haven’t closed beaches and most oil is being cleaned up within hours, Robinson said. Dozens of leisure boats dotted the water at Pensacola Beach, in the state’s Panhandle, while tourists went parasailing or sunbathed on the white sand. “Yes, we’ve had impact, but it hasn’t been a disaster on the beach,” Robinson said. Pensacola Mayor Mike Wiggins walked this morning along Casino Beach, near a Hilton resort and a restaurant named after Ernest Hemingway , and said he went 100 yards without spotting any tar balls. Size of a Hamburger “Then you might see a few, then none again for a long time,” Wiggins said at the press briefing. The biggest tar balls he saw were about the size of a hamburger, he said. U.S. Representative Jeff Miller , a Republican who represents the Pensacola area, said he flew over the Gulf with the Coast Guard today and saw tar balls mostly at Florida’s border with Alabama. A large sheen of oil was six miles off of Pensacola Beach, and a smaller sheen was close to the shoreline, he said. Would-be tourists “obviously have a lot of questions,” Jennifer Williams, director of sales and marketing for the WaterColor Inn and Resort in Santa Rosa Beach, said in an interview. “For the most part, people are still booking,” she said. “Honestly, we don’t know what’s going to happen.” John Gerseth, 43, a part-time plumber interviewed in Pensacola Beach, said “businesses out here are totally freaking out.” “Tourism is how we make our living,” he said in an interview. “If that’s gone, it’s all over.” Surfer, Boater Gerseth said he grew up in the area, and he and his wife saved money to move back from Las Vegas in 2007. “The reason people come out here and forgo careers is so they can enjoy the beach,” he said. “I’m a surfer, I’m a boater — now that all may be gone.” Escambia County, which includes Pensacola and Pensacola Beach, has committed $3 million for the cleanup so far, Robinson said yesterday. The county is seeking reimbursement from a $25 million state fund provided by BP. Workers are picking up tar balls with shovels and gloves, and the county is making cleanup recommendations to BP where it sees fit, he said. “We have expertise here, we know how to clean up beaches – - we do it 365 days a year,” Robinson said. “There are times when Escambia County has more experience than BP on some of these things.” Scuba Shack Business was already down about 80 percent at Pensacola’s Scuba Shack, the oldest and largest scuba-dive operator in the city, said Eilene Beard, a co-owner of the 29-year-old company. She received an initial payment from BP of $5,000 for lost business, and now has to compile three years of business-tax paperwork and monthly revenue reports to submit in an effort to get additional money. Scuba Shack had just spent more than $20,000 on a new roof for its store, repairs on its 50-foot boat and equipment refurbishing in preparation for peak season, she said. The Scuba Shack’s boat, the Wet Dream, has been chartered by BP for oil observation in the Gulf since May 28 “and we haven’t sent out any divers since,” said Beard, 61, who was born in Pensacola. Fear that oil may be coming has spread beyond the Panhandle beaches. U.S. Representative Kathy Castor , a Democrat from the state, met June 3 with hoteliers, business owners, fishermen and environmentalists in St. Petersburg in west-central Florida. “There’s tremendous anxiety,” Castor said in an interview. To contact the reporters on this story: Kim Chipman in Pensacola Beach, Florida at KChipman@bloomberg.net ; Mary Jane Credeur in Pensacola Beach, Florida at 1322 or mcredeur@bloomberg.net .

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China Agricultural Bank Record IPO Hangs on Customers

June 4, 2010

By Bloomberg News June 4 (Bloomberg) — Agricultural Bank of China Ltd. has about 350 million reasons why investors might want to buy into what could be the world’s largest initial public offering, and construction worker Zhao Qiang is one of them. Zhao, who moved to Beijing from the eastern Anhui province three years ago, uses the bank to wire part of his monthly income to his parents back home, about 1,100 kilometers (683 miles) away. “I like Agricultural Bank, it’s very convenient,” said Zhao, 38, as he and his wife withdrew 200 yuan ($29) from their savings account at the lender’s branch in Yongding County outside the Chinese capital in May. Agricultural Bank, which plans an IPO local media have said could raise as much as $30 billion, is less profitable than all its major rivals and more prone to extending loans that default . Chairman Xiang Junbo is betting investors will overlook those weaknesses because of a different type of asset: its 350 million customers, mainly spread around rural areas that are the focus of a government push to lessen the gap in living standards in the world’s fastest-growing major economy . “For investors who want to have exposure to different segments of the growth in China, it represents a unique stock to hold in a diversified portfolio,” said Victoria Mio , a Hong Kong-based senior fund manager at Robeco Group, which oversees $194 billion worldwide. Mio said she plans to subscribe for stock in the IPO if the valuation is “reasonable.” Pulled IPOs The Hong Kong stock exchange is scheduled to hold a listing hearing for the sale on June 10, two people with knowledge of the matter said. The nation’s securities regulator plans to release Agricultural Bank’s prospectus today, Reuters reported today. Agricultural Bank Board Secretary Li Zhenjiang wasn’t available to comment. Xiang, 53, will still have to persuade investors rattled by Greece’s debt crisis, a stock-market slump and a crackdown in China on real-estate speculation to part with cash. At least 20 companies worldwide postponed or withdrew IPOs in May as the MSCI World Emerging Markets Index slid 9.2 percent, data compiled by Bloomberg show. Agricultural Bank will sell shares in Hong Kong and Shanghai. Hong Kong’s benchmark Hang Seng Index has dropped 9.6 percent this year, while the Shanghai Composite Index plunged 22 percent for the worst performance among the world’s 10 biggest equity markets, according to Bloomberg data. “The domestic market has been hit by the property curbing measures, and the recent plunge in overseas markets will have further negative impact on China,” said Deng Yongming , who helps oversee about 2.2 billion yuan at Changsheng Fund Management Co. in Beijing. “For Agricultural Bank, it’s really bad timing.” China IPOs Rally Chinese IPOs have defied the drop in the wider market this year. Shares of companies that have gone public in Shanghai and Shenzhen gained an average 29 percent in their first month of trading through June 1, according to data compiled by Bloomberg. Agricultural Bank’s IPO, which may surpass the $22 billion sale by Beijing-based Industrial & Commercial Bank of China Ltd. in 2006, marks the final chapter of a decade-long overhaul of the country’s banking industry. The government spent an estimated $650 billion to clean out bad loans that were the legacy of years of state-directed lending gone awry. Set up in 1951 by Mao Zedong to finance rural cooperatives, Agricultural Bank was the first Chinese commercial lender established during Communist rule. Xiang now plans to delve further into areas left out of the economic transformation that’s lifted 300 million Chinese out of poverty in the past three decades according to the United Nations . 24,000 Branches Under a 10-year plan that started in 2008, Agricultural Bank, commonly known as ABC, aims to increase its rural customers to 400 million — more than the combined population of the U.S. and Germany — by the end of 2011. The plan, which was made public in March, also calls for the lender to double loans to farmers and agricultural businesses in the period. Agricultural Bank, commonly known as ABC, has more than 24,000 branches that dot the country from tropical Hainan Island in the south to Nenjiang in the northernmost Heilongjiang province. The bank has outlets in Kashgar in China’s west, 4,800 kilometers from Beijing where it is based. ICBC , whose market value of $216 billion makes it the world’s biggest bank by that measure, has 16,232 branches and 216 million individual customers in China. London-based HSBC Holdings Plc , the world’s third-largest lender by market value, operates more than 8,000 offices in 88 countries. ‘Growth Engine’ “ABC’s rural operation is not a profit maker yet, but I have no doubt that it will eventually become a stable growth engine that can’t be easily matched by competitors,” said Liao Qiang , a Beijing-based analyst at Standard & Poor’s. The bank’s focus on serving the poorer parts of China came at the cost of lower profitability and a higher bad-loan ratio than at local rivals, and it was the last lender to undergo a state-led restructuring, in 2008. Agricultural Bank was found to have violated rules related to 10.6 billion yuan in loans it made in 2008, as some of the money was funneled into the stock market and unqualified projects, the National Audit Office said in April. ‘Strike a Balance’ The lender posted profit of 65 billion yuan last year, the official China Daily reported in March, citing Chairman Xiang. That compared with 128.6 billion yuan at ICBC and 106.8 billion yuan at Beijing-based China Construction Bank Corp. Delinquent loans accounted for 2.91 percent of the total as of Dec. 31, almost double ICBC’s ratio — even after the government removed about 800 billion yuan of bad debts from Agricultural Bank’s books in 2008. Shares of ICBC have gained 35 percent in Shanghai and 86 percent in Hong Kong since their Oct. 27, 2006, debut. “The real difficulty for ABC is how to strike a balance between its role as a semi-policy lender serving farmers under a government agenda with its new obligation as a publicly traded entity to maximize profit for shareholders,” Liao said. Chinese Premier Wen Jiabao has made boosting living standards among China’s farmers a priority, promoting loans and subsidies and increasing public works spending as part of a push to double rural dwellers’ earnings by 2020. Two-thirds of people who live outside cities have no access to banking services, according to the China Banking Regulatory Commission . Rural Incomes The average income of a countryside resident was 5,153 yuan last year, less than a third of that in cities, according to government statistics. The gap between rural and urban dwellers has widened since 2001, the data show. Even so, consumption growth in the countryside outpaced that of urban areas for the first time last year, at 15.7 percent. Rural bank lending jumped 35 percent in the first quarter, compared with 22 percent for China as a whole. Rivals including Beijing-based Bank of China Ltd. and China Construction Bank have begun reversing course after closing a combined 31,000 rural branches over the past decade. Bank of China and Temasek Holdings Pte plan to invest up to 20 billion yuan to set up as many as 400 rural banks, people familiar with the matter said in March. Bank of China President Li Lihui said the same month that the lender may start by opening 60 branches under a pilot program. Construction Bank, China’s second-largest, plans to set up a rural banking venture with Spain’s Banco Santander SA , people with knowledge of the matter said last June. Agricultural Bank has received preferential treatments from the central government for some of its rural branches, including tax breaks, a lower requirement for reserves and a waiver on fees to regulators, the Shanghai Securities News reported May 27. “Agribank’s exposure to underdeveloped rural China is obviously good for its longer-term prospects,” said Edward Chan , who oversees about $1 billion at Royal London Asset Management. “It’s not only targeting the farming community, but also countryside workers who are potentially strong consumers.” — Luo Jun , Zhao Yidi , with assistance from Zijing Wu in London, Cathy Chan and Bei Hu in Hong Kong and Michael Tsang in New York. Editors: Philip Lagerkranser , Daniel Hauck . To contact Bloomberg News staff of this story: Luo Jun in Shanghai at +8621-6104-7021 or jluo6@bloomberg.net ; Yidi Zhao in Beijing at +86-10-6649-7575 or yzhao7@bloomberg.net

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Al Gore, Wife Tipper Separating by `Mutual’ Choice After 40-Year Marriage

June 2, 2010

By Edwin Chen June 2 (Bloomberg) — Former Vice President Al Gore and his wife, Tipper , announced yesterday they have made the “mutually supportive” decision to separate after 40 years of marriage. The couple, who have four children, disclosed the news to a small circle of friends in an e-mail sent under both their names, according to Kalee Kreider , a Gore spokeswoman. “After a great deal of thought we have decided to separate,” the Gores wrote. “This is very much a mutual and mutually supportive decision that we have made together, following a process of long and careful consideration. We ask for respect for our privacy and that of our family, and we do not intend to comment further.” Al Gore, 62, was vice president in Bill Clinton ’s administration and sought the presidency in 2000. He lost to Republican George W. Bush in a disputed election in which Gore won the popular vote and Bush won the Electoral College. After the election, Gore focused his energies on raising public awareness of threats posed by climate change, and he shared in the 2007 Nobel Peace Prize for his efforts. The couple met while each was in high school in the Washington area and married on May 19, 1970. They exchanged a much-publicized kiss on stage at the 2000 Democratic National Convention in Los Angeles where Gore was nominated for the presidency. Tipper Gore , 61, was urged by some Democrats to run for the U.S. Senate in 2002 from the couple’s home state of Tennessee. She decided to forego the race. Political Career Al Gore had represented Tennessee in the U.S. House, first winning his seat in 1976, and then was elected senator in 1984. He unsuccessfully sought the Democratic presidential nomination in 1988; Clinton selected him as his running mate four years later. Tipper Gore gained national attention in the mid-1980s for the concerns she expressed about violent or sexually explicit music lyrics. She was a co-founder of the Parents Music Resource Center, which advocated warning labels on music. In recent years, much of her work has involved mental illness prevention and treatment. Al Gore is a member of the board of directors of Cupertino, California-based Apple Inc . and serves as a senior adviser to Google Inc ., based in Mountain View, California. The Los Angeles Times reported in April that the couple had purchased a five-bedroom home near Santa Barbara, California, for more than $8.8 million. To contact the reporter on this story: Edwin Chen in Washington at echen32@bloomberg.net

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Prada Said to Consider Initial Public Offering for Fifth Time in 10 Years

June 2, 2010

By Sara Gay Forden, Elisa Martinuzzi and Andrew Roberts June 2 (Bloomberg) — Prada SpA, buoyed by surging profit at the eponymous fashion label, is exploring options to revive an initial public offering, according to four people familiar with the talks. Prada, which has scrapped an IPO four times in the last 10 years, is considering a Hong Kong listing in addition to Milan, said two of the people, who declined to be identified before a decision is made. Prada hasn’t yet appointed banks to manage the transaction, and talks may not lead to an offering, they said. Prada has cut debt and opened new stores in Asia as the industry rebounds from the worst year on record. Perfume maker L’Occitane International SA sold stock in Asia last month to take advantage of demand for IPOs in the region amid optimism that economic growth will exceed expansion elsewhere. “Prada has sailed well through choppy waters, thanks to its presence in Asia and the resilience of its shoe and handbag business,” said Armando Branchini , vice-president of Milan- based consulting firm InterCorporate. “The strong rebound in the first quarter, which may continue through the end of the year, would make it an opportune time to consider an IPO.” The company continues to monitor market conditions, said a Prada spokesman, declining to comment further. While Prada may hold an IPO as soon as this year, it’s more likely the firm will wait for stock markets to rise and sell stock in 2011, according to one person. Surging Profit The fashion company, which is controlled by Chief Executive Officer Patrizio Bertelli , his wife Miuccia Prada and her family, said May 24 first-quarter earnings before interest, taxes, depreciation and amortization surged to 64 million euros ($78.5 million) from 11 million euros a year earlier. Revenue rose 26 percent to 366 million euros, led by a 62 percent gain in the Asia Pacific region. Prada abandoned plans to list in 2008 because of adverse market conditions. The company had hired Intesa Sanpaolo SpA, UniCredit SpA and Goldman Sachs Group Inc. to manage the offering at the time. Prada, founded by head designer Miuccia Prada’s grandfather Mario Prada in 1913, still operates its first outlet in Milan’s 19th century Galleria shopping arcade. To contact the reporters on this story: Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net ; Sara Gay Forden in Milan via sforden@bloomberg.net ; Andrew Roberts in Paris at aroberts36@bloomberg.net

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Billion-Dollar Lawyer Quits Firm, Buys Patents to Troll for License Fees

June 1, 2010

By Carlyn Kolker June 1 (Bloomberg) — John Desmarais , a former top earner at the 1,500-lawyer firm Kirkland & Ellis , spent more than 15 years representing some of the world’s largest patent owners. Now he’s one of them, and he’s gearing up to slay the kinds of companies he once defended. Desmarais, 46, in December bought a portfolio of 4,500 patents from Micron Technology Inc. , the biggest U.S. maker of computer-memory chips. Today he opens the doors of a new law firm, New York-based Desmarais LLP , which will look for potential infringers of the patents owned by Round Rock Research LLC, his new patent-holding company. The move is a leap from one side of the patent world to the other: from big-firm lawyer to small-firm chief, and from a champion of companies that makes real products to leading one that simply owns patents. “It’s a huge change,” said Desmarais, who withdrew from Kirkland’s partnership and the firm’s management committee in December and left in May. “I never just get my toes wet doing something different. I jumped in with both feet.” Round Rock is the second-largest owner of patents among so- called nonpracticing entities, or companies that don’t sell the technology or services for which they hold patents, according to PatentFreedom , a group that keeps a database of patent holdings. Those companies are sometimes referred to as “ trolls ,” a phrase coined by a former Intel Corp. executive. The largest nonpracticing entity is Intellectual Ventures Management LLC, started by a former Microsoft Corp. executive, with from 10,000 to 15,000 groups of patents, according to PatentFreedom. Attention-Getting “In addition to crossing the barrier from the defense side to the plaintiff side, he’s firmly committed himself on the side of nonpracticing entity, which is attracting attention,” William F. Lee , an intellectual-property litigator and co- managing partner of Wilmer Cutler Pickering Hale & Dorr LLP , said of Desmarais. “The question of whether allowing nonpracticing entities to litigate is promoting innovation or taxing innovation is a big question.” Desmarais said he bought more than 800 patents on chipmaking technology, as well as patents on photo imaging, telecommunications and search engine technology, plus the largest single cluster of radio frequency identification patents. Round Rock, based in Mount Kisco, New York, is named for a formation near the beach in Madison, Connecticut, where Desmarais, who is married with two teenage children, has a vacation home. His 14-year-old daughter designed the company’s logo and his business card. Micron Sale Micron, a Desmarais client, is selling some assets to recoup investments in research and development, it said in an October regulatory filing . The sale price was confidential, Desmarais said. Micron, based in Boise, Idaho, has a license to use the patents royalty- free, he said. Round Rock hasn’t yet inked any deals or started any litigation, Desmarais said. “There is a good story about nonpracticing entities, also known as trolls, and a bad story about nonpracticing entities,” said John F. Duffy , a law professor at George Washington University . “The good story about nonpracticing entities is that they are developing liquidity in the market for these patent rights,” he said. On the negative side, they are given patent rights for goods or services they don’t make and can sue other companies for infringement, he said. Gaming the System? “People may say nonpracticing entities are gaming the system, that there is something wrong with the rules of the patent system that allows them to win cases without adding something to society,” Duffy said. Lawsuits brought by the patent companies peaked at about 500 in 2008, according to PatentFreedom. Litigation by nonpracticing entities has been on the rise, says PatentFreedom, with 75 percent of their 3,100 legal actions coming since 2003. “We’re not taking the approach of having ridiculous demands and assuming there will be litigation,” said Desmarais. “I think our approach will be a lot more reasonable.” He won’t rule out litigation in the future, he said. At Chicago-based Kirkland & Ellis, Desmarais built a reputation trying patent cases for large companies with hundreds of millions, and sometimes billions, of dollars at stake. $1.5 Billion Verdict He was the lead trial lawyer for Forest Laboratories Inc. in an effort to block Teva Pharmaceutical Industries Ltd. from selling a generic version of the antidepressant Lexapro. He represented Boston Scientific Corp. in litigation over patents for drug-coated stents. And he won a $1.52 billion verdict for Alcatel-Lucent against Microsoft in 2007, then the largest patent verdict. It was reversed, and Microsoft and Alcatel- Lucent later settled most of their patent dispute. His skill lies in presenting scientific and technological concepts in a plain-spoken manner to a judge or jury, say clients and lawyers who have worked with him. “He’s a fabulous trial attorney,” said Mallun Yen, vice president for worldwide intellectual property at Cisco Systems Inc. , the biggest maker of networking equipment. “He is at complete ease in the courtroom and he has a likeability about him that spans across jurisdictions and judges and juries.” Desmarais was raised in Hartford, Connecticut, and lived with his mother, who became a hairdresser after she and his father, a construction worker, divorced. He moved to Valhalla, New York, where he played high school football and met the cheerleader who became his wife. Chemical Engineering Desmarais earned an undergraduate degree in chemical engineering at Manhattan College in Riverdale, New York, and graduated from New York University School of Law in 1988. He spent three years trying drug and bank robbery cases in the federal prosecutors’ office in Manhattan. That was followed by a job at a law firm specializing in intellectual property. Then Desmarais joined the New York office of Kirkland & Ellis in 1997. The departure from Kirkland was amicable, and he is working with the firm as he wraps up matters there, Desmarais said. Kate Kortenkamp , a spokeswoman for the law firm, declined to comment on his departure. Desmarais LLP will represent Round Rock in asserting its patents. It may represent other patent holders that want to sue big companies. Large law firms typically won’t represent patent holders that sue big companies because doing so can create conflicts of interests with corporate clients, Desmarais said. Big Firms “What we’re not going to do is reinvent the big law firm experience,” Desmarais said. The firm will work on an alternative-fee basis instead of charging by the hour as most law firms do, he said. It may set a fixed fee for a legal job or collect contingency fees, sharing part of the proceeds of verdicts and settlements. “It fills a market niche that doesn’t exist right now in legal services” Desmarais said. The firm has hired three attorneys. It will probably reach about 12 lawyers by the end of the year and not exceed 25, Desmarais said. Filing a patent suit can require large upfront investment, said Mike McKool , chairman of Dallas-based McKool Smith. His firm has spent $200,000 to $300,000 on technological and legal research, then decided not to take cases, he said. When it sues and wins, a case can generate “enormous,” fees, McKool said. “John has a keen business sense,” McKool said. “I think this is a terrific thing for John.” To contact the reporter on this story: Carlyn Kolker in New York at ckolker@bloomberg.net .

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Gulf Oil Spill: Best Chance To Stop Leak Won’t Be Ready Until August

May 31, 2010

NEW ORLEANS — The best hope for stopping the flow of oil from the blown-out well at the bottom of the Gulf of Mexico has been compared to hitting a target the size of a dinner plate with a drill more than two miles into the earth, and is anything but a sure bet on the first attempt. Bid after bid has failed to stanch what has already become the nation’s worst-ever spill, and BP PLC is readying another attempt as early as Wednesday, this one a cut-and-cap process to put a lid on the leaking wellhead so oil can be siphoned to the surface. But the best-case scenario of sealing the leak is two relief wells being drilled diagonally into the gushing well – tricky business that won’t be ready until August. “The probability of them hitting it on the very first shot is virtually nil,” said David Rensink, incoming president of the American Association of Petroleum Geologists, who spent most of his 39 years in the oil industry in offshore exploration. “If they get it on the first three or four shots they’d be very lucky.” For the bid to succeed, the bore hole must precisely intersect the damaged well. If it misses, BP will have to back up its drill, plug the hole it just created, and try again. The trial-and-error process could take weeks, but it will eventually work, scientists and BP said. Then engineers will then pump mud and cement through pipes to ultimately seal the well. As the drilling reaches deeper into the earth, the process is slowed by building pressure and the increasing distance that well casings must travel before they can be set in place. Still, the three months it could take to finish the relief wells – the first of which started May 2 – is quicker than a typical deep well, which can take four months or longer, said Tad Patzek, chair of the Petroleum and Geosystems Engineering Department at the University of Texas-Austin. BP already has a good picture of the different layers of sand and rock its drill bits will meet because of the work it did on the blown-out well. On the slim chance the relief well doesn’t work, scientists weren’t sure exactly how much – or how long – the oil would flow. The gusher would continue until the well bore hole collapsed or pressure in the reservoir dropped to a point where oil was no longer pushed to the surface, Patzek said. “I don’t admit the possibility of it not working,” he said. A third well could be drilled if the first two fail. “We don’t know how much oil is down there, and hopefully we’ll never know when the relief wells work,” BP spokesman John Curry said. The company was starting to collect and analyze data on how much oil might be in the reservoir when the rig exploded April 20, he said. BP’s uncertainty statement is reasonable, given they only had drilled one well, according to Doug Rader, an ocean scientist with the Environmental Defense Fund. Two relief wells stopped the world’s worst peacetime spill, from a Mexican rig called Ixtoc 1 that dumped 140 million gallons off the Yucatan Peninsula. That plug took nearly 10 months beginning in the summer of 1979. Drilling technology has vastly improved since then, however. So far, the Gulf oil spill has leaked between 19.7 million and 43 million gallons, according to government estimates. In the meantime, BP is turning to another risky procedure federal officials acknowledge will likely, at least temporarily, cause 20 percent more oil – at least 100,000 gallons a day – to add to the gusher. Using robot submarines, BP plans to cut away the riser pipe this week and place a cap-like containment valve over the blowout preventer. The company hopes it will capture the majority of the oil, sending it to the surface. “If you’ve got to cut that riser, that’s risky. You could take a bad situation and make it worse,” said Ed Overton, a Louisiana State University professor of environmental sciences. The latest attempt to capture the well comes after BP failed to plug the leak Saturday with its top kill, which shot mud and pieces of rubber into the well but couldn’t beat back the pressure of the oil. The location of the spill couldn’t be worse. To the south lies an essential spawning ground for imperiled Atlantic bluefin tuna and sperm whales. To the east and west, coral reefs and the coastal fisheries of Florida, Alabama, Mississippi and Texas. And to the north, Louisiana’s coastal marshes. More than 125 miles of Louisiana coastline already have been hit with oil. “It’s just killing us by degrees,” said Tulane University ecologist Tom Sherry. It’s an area that historically has been something of a superhighway for hurricanes, too. If a major storm rolls in, the relief well operations would have to be suspended and then re-started, adding more time to the process. Plugging the Ixtoc was also hampered by hurricane season, which begins Tuesday and is predicted to be very active. Three of the worst storms ever to hit the Gulf coast – Betsy in 1965, Camille in 1969 and Katrina in 2005 – all passed over the leak site. On the Gulf coast beaches, tropical weather was far from some tourists’ minds. On Biloxi beach, Paul Dawa and his friend Ezekial Momgeri sipped Coronas after a night gambling at the Hard Rock Casino. Both men, originally from Kenya, drove from Memphis, Tenn., and were chased off the beach by a storm, not oil. “We talked about it and we decided to come down and see for ourselves” whether there was oil, Momgeri said. “There’s no oil here.” Though some tar balls have been found on Mississippi and Alabama barrier islands, oil from the spill has not significantly fouled the shores. Still, the perception that it has soiled white sands and fishing areas threatens to cripple the tourist economy, said Linda Hornsby, executive director of the Mississippi Hotel and Lodging Association “It’s not here. It may never be here. It’s costing a lot of money to counter that perception,” Hornsby said. “First it was cancelations, but that evolved to a decrease in calls and there’s no way to measure that.” Yet there was fear the oil would eventually hit the other Gulf coast states. Hentzel Yucles, of Gulfport, Miss., hung out on the beach with his wife and sons. “Katrina was bad. I know this is a different type of situation, but it’s going to affect everybody,” he said. ___ Associated Press writers Kevin McGill, Ben Nuckols and Greg Bluestein in Covington, La., and Holbrook Mohr in Biloxi, Miss., contributed to this report.

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Dan Solin: FINRA’S Mandatory Arbitration: A Story You Won’t Believe

May 25, 2010

Bill Meekam (not his real name) took early retirement at age 55 after working many years for a large manufacturer. Bill was a sheet metal worker with a high school education. His wife worked at the same company, in a variety of clerical jobs. Both had 401(k) plans at the company. Bill met his future broker (let’s call him Buzz) at a seminar sponsored by his company. Buzz was persistent. He called Bill at work and met with Bill and his wife at his impressive office. Buzz explained the benefits of rolling over all of the money in their 401(k) plans ($400,000) and investing with him. He told them he could make them “millionaires” over time. Bill’s plan for early retirement was enthusiastically endorsed by his employer. In fact, the 401(k) plan administrator at the company participated in three way calls with Buzz, Bill and his wife. Buzz invested all the retirement money entrusted to him in a portfolio of 100% stocks. When Bill and his wife expressed concern they were losing money, they were brushed off by Buzz who said: “Let me do the worrying, this is why I keep a drawer full of TUMS.” After losing a substantial portion of their retirement portfolio, Bill and his wife fired Buzz. They consulted a lawyer and were told they had agreed to mandatory arbitration of all disputes with their broker. The arbitration process is administered and controlled by FINRA , an industry trade association, which holds itself out as “the largest independent regulator for all securities firms doing business in the United States.” At the arbitration, a shocking thing happened. The broker testified (under oath) that he had advised Bill and his wife to invest much more conservatively and to take less income, but they refused. He supported this testimony with memos he sent to them in which he gave precisely this advice. He also produced a document in which Bill and his wife indicated they had a very high tolerance for risk and wanted to speculate. It was devastating. There was just one problem: Bill never received the memos and the signature on the risk tolerance document was forged. Bill’s lawyer retained a firm of forensic document examiners. The firm concluded the memos were not authored on the dates they bore and the signatures on the risk tolerance document were not “authentic.” They submitted a report of their findings to the arbitration tribunal. Confronted with this shocking evidence, counsel for the broker did something quite extraordinary. He wrote the panel and stated: “My client [the broker] is prepared to acknowledge that testimony he gave ….was not truthful and he desires to make this clear to all parties and the Panel.” In any Court of law, an admission of perjury, forgery and obstruction of justice would, at the least, mean that all defenses would be stricken and judgment would be entered in the full amount claimed, plus interest, attorneys’ fees and, most likely punitive damages. Most judges would also refer the matter for criminal prosecution. So what did this FINRA arbitration panel do? They awarded a fraction of the losses incurred by Bill and his wife. No attorneys’ fees. No punitive damages. Not even reimbursement for the cost of the forensic document examiner! After payment of expenses, Bill and his wife netted less than 15% of the amount claimed. What happened to the broker? He was fired by his firm, but quickly obtained employment with another major brokerage firm where he continues to “serve” investors. FINRA took no action against him. On its web site , FINRA claims it “…protects the most important investor in the world. You.” William Galvin, the Secretary of the Commonwealth of Massachusetts has a different take. He testified that FINRA’s mandatory arbitration system is “an industry sponsored damage-containment and control program masquerading as juridical proceeding.” Who do you believe? The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein. Furthermore, the information on this blog should not be construed as an offer of advisory services. Please note that the author does not recommend specific securities nor is he responsible for comments made by persons posting on this blog.

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Kathy Snyder: Fear, Intimidation Alleged By Speakers At Upper Big Branch Hearing

May 24, 2010

Six family members of five miners who lost their lives in the Upper Big Branch Mine, and one surviving miner, today described a climate of fear for their safety, and fear of being fired, among miners at the operation before the explosion. They and West Virginia Governor Joe Manchin III testified at a 3-hour field hearing of the U.S. House of Representatives Education and Labor Committee. Committee members at the hearing were chairman George Miller (D-Ca.), ranking member John Kline (R-Minn.), subcommittee chairman Lynn Woolsey (D-Ca.), Rep. Jason Altimre (D-Pa.), and Rep. Carol Shea-Porter (D-N.H.). Also on the panel as guests were Sen. Jay Rockefeller (D-W.Va.), Rep. Nick Rahall (D-W.Va.), Rep. Shelley Moore Capito (R-W.Va.) and Rep. Alan Mollohan (D-W.Va.). Secretary of Labor Hilda Solis and Assistant Secretary for MSHA Joe Main attended as observers. Upper Big Branch miner Stanley “Goose” Stewart said that he was concerned enough about safety at the mine to tell his wife some months ago that if anything happened to him, she should sue the company. At his wife’s request, he wrote down various on-the-job incidents in a small notebook, including a ventilation change he said was illegally made last July with miners still in the mine. Stanley, who had his notes with him at the hearing, said afterwards that he was on the schedule to speak with MSHA investigators. Family members said their loved ones also talked about serious safety concerns. The father of Adam Morgan said his son described ventilation controls often out of place and spoke of being required to work alone in the Upper Big Branch Mine, even though as an apprentice he was required to be accompanied at all times by an experienced miner. When an MSHA inspector was on the property, he reportedly would be teamed with an experienced miner to hide the practice. When the younger Morgan questioned safety practices at Upper Big Branch, his boss told him “If you’re going to be that scared of your job, then you need to rethink your career,” his father said. Alice Peters, mother-in-law of Edward Dean Jones, stated that Jones “often told me and his wife that he was afraid to go to work.” Jones stayed with the job at Upper Big Branch, Peters said, because his son has cystic fibrosis and he needed to maintain his health insurance benefits. At the end of the hearing Leo Long, grandfather of Ronald Maynor, also volunteered to testify. He stated that his grandson had told him the company had a way to bridge out the methane monitors on continuous mining machines to keep working in the presence of methane that would normally shut the machines down Additional family members who testified were Gary Quarles, father of Gary Wayne Quarles; Eddie Cook, uncle of Adam Morgan; and Clay Mullins, brother of Rex Mullins. Among other points, Manchin raised a question of whether activities by MSHA and the West Virginia OMSL were duplicative and should be rearranged, with perhaps the state doing more training. Manchin suggested that perhaps each mine should have a team of miners who are specially trained and certified, with special powers to take action and with immunity from threats and intimidation.. He also stated that the government needs “to make sure the corporate veil does not protect anybody” who engages in wrongdoing. June 2 is now the target date when state and federal investigator hope to get underground at Upper Big Branch, Manchin and MSHA administrator Kevin Stricklin stated.

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Thai Army Moves to Enforce Curfew After Ending Mission to Disperse Rioters

May 20, 2010

By Daniel Ten Kate and Supunnabul Suwannakij May 20 (Bloomberg) — Thai security forces struggled to clear rioters from high-rise buildings and extended a curfew as protests spread outside Bangkok a day after the forced surrender of anti-government demonstrators left 15 people dead. “Physically we can rebuild Bangkok quickly, but I don’t know how long it will take to cure the psychological damage,” Bangkok Governor Sukhumbhand Paribatra said in an interview with Channel 7. “We will never forget May 19 in our lifetime.” Fighting continued today after 39 buildings burned in Bangkok and armed groups remained in high-rises in the downtown commercial area, army spokesman Sansern Kaewkamnerd told reporters. There are about 13,000 protesters rallying in as many as 20 provinces outside Bangkok and the government is trying to prevent unrest from spreading, he said. The government extended a 9 p.m. to 5 a.m. curfew in a third of the country for the next three days, he said. Reports of disturbances in northeast Thailand, home to many of the Red Shirt demonstrators, underscore the widening social rifts that may thwart political reconciliation. “Clearing the demonstrators is the easy part,” said Duncan McCargo , a professor of Southeast Asian politics at the University of Leeds. By relying on force, “authorities have lost the opportunity to shape the aftermath of the protests and risk provoking an even more alarming conflict.” Collapsed Building A more than 10-hour fire at the Central World shopping and office complex has left the building in danger of collapse, Thanom Onketpol, an adviser to Bangkok’s governor, said by phone. Three other structures in the downtown area were still burning as of about 1 p.m., he said. One fire damaged the stock exchange, he told Thai PBS television. The death toll from yesterday’s clash is 15 people, the Bangkok Emergency Medical Service said on its Web site, after officials cited an additional fatality earlier in the day. The benchmark SET Index rose 0.7 percent yesterday before the exchange announced it would close for the rest of the week. Japan’s two largest automakers, Toyota Motor Corp. and Honda Motor Co. , suspended production in Thailand yesterday, citing ongoing violence. Toyota doesn’t expect to resume operations for a few more days, spokesman Paul Nolasco said today. Honda hasn’t decided whether to restart tomorrow, spokeswoman Yuki Watanabe said in Tokyo. Ten Bangkok Bank Pcl branches were damaged, together with two outlets each of Kasikornbank Pcl , Krung Thai Bank Pcl and Siam City Bank Pcl, Thanom said. Protesters also torched a city hall in Udon Thani province and seized a government building in Khon Kaen . Fire, Grenades Protesters also set fire to a Siam City branch north of the main protest site and fought security forces with grenades, INN reported. Authorities will protect communication and transportation systems in “various areas,” government spokesman Panitan Wattanayagorn said in a broadcast. Security been increased around embassies and tourist areas, he said. U.S. State Department spokesman Gordon Duguid condemned the violence and urged both sides to resolve their differences democratically. Sixteen people died and 81 were injured in clashes yesterday, including 9 bodies found at a temple in the protest zone, the Bangkok Emergency Medical Service said. Security forces found weapons caches in the central Bangkok protest site occupied by demonstrators since April 3, Prime Minister Abhisit Vejjajiva said last night. He vowed harsh punishments for “terrorists” vandalizing the city. Temple Shelter About 800 children, women and elderly protesters took shelter last night in a temple between two burning shopping malls, Thai PBS television network said. Street battles in the past week between security forces and demonstrators contributed to Thailand’s deadliest political turmoil in almost two decades. The health ministry said eight people were hurt in clashes outside Bangkok. Exiled former Prime Minister Thaksin Shinawatra , to whom many of the protesters express loyalty, said the decision to surrender prevented more casualties. “I appreciate the Red Shirt leaders’ move to save lives by surrendering to police,” he said on his Twitter account. Thaksin, a 60-year-old billionaire, won over the poor in the northeast of the country by giving them cheap health care and loans. The demonstrators, angered by one of Asia’s widest income gaps, say Abhisit, 45, embodies a privileged class of military officers, judges, bureaucrats and royal advisers that sits above the law. Address Inequality Abhisit’s five-part proposal to end the national divide includes measures to safeguard the monarchy, address economic inequality, ensure an independent media, create a body to investigate political violence and assess ways to change the constitution and disputed laws. Thaksin, who was ousted by the Thai army in 2006, fled the country in 2008 before a court sentenced him to two years in prison for helping his wife buy land from the government while still in power. Since 1946, when King Bhumibol Adulyadej took the Thai throne as an 18-year-old, Thailand has seen nine coups and more than 20 prime ministers. Only two of 17 constitutions since absolute monarchy ended in 1932 have mandated parliaments that are entirely elected. The king, who is revered across the nation, has been in a hospital since Sept. 19 and hasn’t spoken publicly about the current demonstrations. Abhisit’s party hasn’t won the most seats in a nationwide vote since 1992. He was picked by legislators in December 2008 after a court dissolved the pro-Thaksin ruling party for election fraud. The decision coincided with the seizure of Bangkok’s airports by protesters wearing yellow shirts who oppose Thaksin. To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

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Thai Troops Clash With Rioters After Protests End as Fires Burn in Bangkok

May 19, 2010

By Daniel Ten Kate and Supunnabul Suwannakij May 20 (Bloomberg) — Thai authorities vowed to restore order after the forced surrender of anti-government protesters sparked riots across Bangkok, threatening renewed political instability as mobs burned banks, shopping malls and the stock exchange. The government imposed an 8 p.m. curfew in a third of the country and demanded all television stations run state programming. Reports of disturbances in northeast Thailand, where many of the demonstrators live, show the widening social rifts that may thwart political reconciliation. “Clearing the demonstrators is the easy part,” said Duncan McCargo , a professor of Southeast Asian politics at the University of Leeds. By relying on force, “authorities have lost the opportunity to shape the aftermath of the protests and risk provoking an even more alarming conflict.” Rioters set at least 25 buildings afire in Bangkok and northeast Thailand, including a luxury shopping mall and television news station. They torched a city hall in Udon Thani province and seized a government building in Khon Kaen . “We will continue to fight for democracy; this is not our day,” Nattawut Saikuar , one of several Red Shirt leaders, said when he arrived at the police station in comments broadcast by TNN News. “We have been trying to do our best for the country to be truly owned by the people.” Condemning the Violence The U.S. condemned the violence and urged both sides to resolve their differences democratically. “The U.S. deeply deplores the violence and the loss of life that has resulted from clashes between security forces and protests by the United Front for Democracy Against Dictatorship,” said State Department spokesman Gordon Duguid . Duguid praised Red Shirt leaders who surrendered to Thai authorities and encouraged their supporters to return home peacefully. The arson attacks drew a rebuke. “We are deeply concerned that Red Shirt supporters have engaged in arson, targeting the electricity infrastructure and media outlets and have attacked individual journalists,” Duguid said. “We condemn such behavior.” Security forces found weapons caches in the central Bangkok protest site occupied by demonstrators since April 3, Prime Minister Abhisit Vejjajiva said last night. He vowed harsh punishments for “terrorists” vandalizing the city among the protesters, who say his rule is illegitimate. Gun Threat Police and soldiers may use guns to “prevent any action that will further destabilize the country,” Tarit Pengdit, director-general of the Department of Special Investigation, said last night. Arsonists may face the death penalty, he said. Few cars traveled on Bangkok roads last night as citizens heeded the curfew, television footage showed. One fire in the city substantially damaged the stock exchange, Thamon Onketpol, an adviser to the governor of the Bangkok Metropolitan Administration , told Thai PBS television. After the military crackdown, about 800 children, women and elderly protesters took shelter in a temple between two burning shopping malls, Thai PBS television network said. Gunfire crackled and explosions rocked the city into the night after protest leaders were escorted from the camp’s main stage to a nearby police station. The Central World shopping mall was gutted by flames, fire official Narunart Boonkong said. Six Killed Street battles in the past week between security forces and demonstrators contributed to Thailand’s deadliest political turmoil in almost two decades. Yesterday’s clashes killed six people, including an Italian journalist, and injured 58, according to a statement on the website of the Bangkok Emergency Medical Service. The health ministry said eight people were hurt in clashes outside Bangkok. Nattawut and fellow activist Jatuporn Prompam told supporters from the main stage that they decided to surrender to avoid further bloodshed. Kasikornbank Pcl, Thailand’s third-biggest bank by assets, said a fire broke out at a branch on Rama IV Road near the main protest area. PBS reported fires in Siam Square at a Bangkok Bank Pcl branch , a Siam City Bank Pcl branch and a local theater. Power was cut at the JW Marriott Bangkok hotel . The benchmark SET Index rose 0.7 percent yesterday before closing for the day at the morning break. The baht fell 0.1 percent. ‘Special Programs’ Foreigners should carry identification when traveling, government spokesman Panitan Wattanayagorn said, vowing that security forces will provide stability and security during the night. Television channels will switch to “special programs,” he said. Exiled former Prime Minister Thaksin Shinawatra , to whom many of the protesters express loyalty, said the decision to surrender prevented more casualties. “I appreciate the Red Shirt leaders’ move to save lives by surrendering to police,” he said on his Twitter account. “I am so sorry for those who lost their lives and got injured.” Abhisit’s five-part proposal to end the national divide includes measures to safeguard the monarchy, address economic inequality, ensure an independent media, create a body to investigate political violence and assess ways to change the constitution and disputed laws. ‘Even Deeper’ “After today, the divisions in the country will get even deeper,” said Michael Nelson, a visiting scholar at Bangkok’s Chulalongkorn University. “How can you have a stable political system when two large areas of the country are no-go zones for the two major political parties?” Thaksin, a 60-year-old billionaire, won over the poor in the northeast of the country by giving them cheap health care and loans. The demonstrators, angered by one of Asia’s widest income gaps, say Abhisit, 45, embodies a privileged class of military officers, judges, bureaucrats and royal advisers that sits above the law. Thaksin, who was ousted by the Thai army in 2006, fled the country in 2008 before a court sentenced him to two years in prison for helping his wife buy land from the government while still in power. Since 1946, when King Bhumibol Adulyadej took the Thai throne as an 18-year-old, Thailand has seen nine coups and more than 20 prime ministers. Only two of 17 constitutions since absolute monarchy ended in 1932 have mandated parliaments that are entirely elected. The king, who is revered across the nation, has been in a hospital since Sept. 19 and hasn’t spoken publicly about the current demonstrations. Abhisit’s party hasn’t won the most seats in a nationwide vote since 1992. He was picked by legislators in December 2008 after a court dissolved the pro-Thaksin ruling party for election fraud. The decision coincided with the seizure of Bangkok’s airports by protesters wearing yellow shirts who oppose Thaksin. To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

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Thai Army Assault Ignites Bangkok Riots in Sign of Festering Instability

May 19, 2010

By Daniel Ten Kate and Supunnabul Suwannakij May 20 (Bloomberg) — Thai authorities vowed to restore order after the forced surrender of anti-government protesters sparked riots across Bangkok, threatening renewed political instability as mobs burned banks, shopping malls and the stock exchange. The government imposed an 8 p.m. curfew in a third of the country and demanded all television stations run state programming. Reports of disturbances in northeast Thailand, where many of the demonstrators live, show the widening social rifts that may thwart political reconciliation. “Clearing the demonstrators is the easy part,” said Duncan McCargo , a professor of Southeast Asian politics at the University of Leeds. By relying on force, “authorities have lost the opportunity to shape the aftermath of the protests and risk provoking an even more alarming conflict.” Rioters set at least 25 buildings afire in Bangkok and northeast Thailand, including a luxury shopping mall and television news station. They torched a city hall in Udon Thani province and seized a government building in Khon Kaen . “We will continue to fight for democracy; this is not our day,” Nattawut Saikuar , one of several Red Shirt leaders, said when he arrived at the police station in comments broadcast by TNN News. “We have been trying to do our best for the country to be truly owned by the people.” Weapons Caches Security forces found weapons caches in the central Bangkok protest site occupied by demonstrators since April 3, Prime Minister Abhisit Vejjajiva said last night. He vowed harsh punishments for “terrorists” vandalizing the city among the red shirt protesters, who say his rule is illegitimate. Police and soldiers may use guns to “prevent any action that will further destabilize the country,” Tarit Pengdit, director-general of the Department of Special Investigation, said last night. Arsonists may face the death penalty, he said. Few cars traveled on Bangkok roads last night as citizens heeded the curfew, television footage showed. One fire in the city substantially damaged the stock exchange, Thamon Onketpol, an adviser to the governor of the Bangkok Metropolitan Administration , told Thai PBS television. After the military crackdown, about 800 children, women and elderly protesters took shelter in a temple between two burning shopping malls, Thai PBS television network said. Gunfire crackled and explosions rocked the city into the night after protest leaders were escorted from the camp’s main stage to a nearby police station. The Central World shopping mall was gutted by flames, fire official Narunart Boonkong said. Six Killed Street battles in the past week between security forces and demonstrators contributed to Thailand’s deadliest political turmoil in almost two decades. Yesterday’s clashes killed six people, including an Italian journalist, and injured 58, according to a statement on the website of the Bangkok Emergency Medical Service. The health ministry said eight people were hurt in clashes outside Bangkok. Nattawut and fellow activist Jatuporn Prompam told supporters from the main stage that they decided to surrender to avoid further bloodshed. Kasikornbank Pcl, Thailand’s third-biggest bank by assets, said a fire broke out at a branch on Rama IV Road near the main protest area. PBS reported fires in Siam Square at a Bangkok Bank Pcl branch , a Siam City Bank Pcl branch and a local theater. Power was cut at the JW Marriott Bangkok hotel . The benchmark SET Index rose 0.7 percent yesterday before closing for the day at the morning break. The baht fell 0.1 percent. ‘Special Programs’ Foreigners should carry identification when traveling, government spokesman Panitan Wattanayagorn said, vowing that security forces will provide stability and security during the night. Television channels will switch to “special programs,” he said. Exiled former Prime Minister Thaksin Shinawatra , to whom many of the protesters express loyalty, said the decision to surrender prevented more casualties. “I appreciate the Red Shirt leaders’ move to save lives by surrendering to police,” he said on his Twitter account. “I am so sorry for those who lost their lives and got injured.” Abhisit’s five-part proposal to end the national divide includes measures to safeguard the monarchy, address economic inequality, ensure an independent media, create a body to investigate political violence and assess ways to change the constitution and disputed laws. ‘Even Deeper’ “After today, the divisions in the country will get even deeper,” said Michael Nelson, a visiting scholar at Bangkok’s Chulalongkorn University. “How can you have a stable political system when two large areas of the country are no-go zones for the two major political parties?” Thaksin, a 60-year-old billionaire, won over the poor in the northeast of the country by giving them cheap health care and loans. The demonstrators, angered by one of Asia’s widest income gaps, say Abhisit, 45, embodies a privileged class of military officers, judges, bureaucrats and royal advisers that sits above the law. Thaksin, who was ousted by the Thai army in 2006, fled the country in 2008 before a court sentenced him to two years in prison for helping his wife buy land from the government while still in power. Since 1946, when King Bhumibol Adulyadej took the Thai throne as an 18-year-old, Thailand has seen nine coups and more than 20 prime ministers. Only two of 17 constitutions since absolute monarchy ended in 1932 have mandated parliaments that are entirely elected. The king, who is revered across the nation, has been in hospital since Sept. 19 and hasn’t spoken publicly about the current demonstrations. Abhisit’s party hasn’t won the most seats in a nationwide vote since 1992. He was picked by legislators in December 2008 after a court dissolved the pro-Thaksin ruling party for election fraud. The decision coincided with the seizure of Bangkok’s airports by protesters wearing yellow shirts who oppose Thaksin. To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

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Thai Army Seizes Protest Areas as Red Shirt Leaders Surrender Amid Gunfire

May 19, 2010

By Daniel Ten Kate and Supunnabul Suwannakij May 19 (Bloomberg) — Thai security forces backed by armored vehicles surrounded a protest camp in central Bangkok, forcing its leaders to surrender and ending a six-week standoff that roiled the country and killed more than 60 people. “We want all protesters to leave using the transportation we’re providing,” army spokesman Sansern Kaewkamnerd , said in a televised broadcast. “We completely control the area.” Sporadic gunfire and explosions continued to rock the area as protest leaders were escorted from the camp’s main stage to a nearby police station. Angry protesters shot out windows and set fires in the Central World and Siam Paragon shopping malls, Channel 9 television footage showed. The Red Shirt demonstrators, who view Prime Minister Abhisit Vejjajiva ’s rule as illegitimate, drew thousands of mainly rural supporters to the encampment, underscoring a widening class divide. Reports of disturbances today in northeast Thailand, where many protesters came from, indicate that political reconciliation may be difficult to achieve. “We will continue to fight for democracy; this is not our day,” Nattawut Saikuar , one of several Red Shirt leaders, said when he arrived at the police station, in comments broadcast by TNN News. “We have been trying to do our best for the country to be truly owned by the people.” Political Turmoil Street battles in the past week between security forces and demonstrators contributed to Thailand’s deadliest political turmoil in almost two decades. Today’s clashes killed four people including an Italian journalist, said Petchpong Kumjornkijjakarn, head of Bangkok’s medical emergency unit. Nattawut and fellow activist Jatuporn Prompam told supporters from the main stage that they decided to surrender to avoid further bloodshed. Kasikornbank Pcl, Thailand’s third-biggest bank by assets, said a fire broke out at a branch on Rama IV Road near the main protest area. The Bank of Thailand ordered all financial institutions in the capital to close at 1 p.m. because of security concerns, it said in a statement. The benchmark SET Index rose 0.7 percent before closing for the day at the morning break. The baht fell 0.1 percent. Red shirt supporters set fire to a city hall in Udon Thani Province in northeast Thailand, INN News reported. In northeast Khon Kaen , protesters broke into the city hall to demand an end to the military assault in Bangkok, Channel 3 TV said. Thakin Connection Exiled former Prime Minister Thaksin Shinawatra , to whom many of the protesters express loyalty, earlier called for direct talks between the government and rally organizers. “After today the divisions in the country will get even deeper,” said Michael Nelson, a visiting scholar at Bangkok’s Chulalongkorn University. “How can you have a stable political system when two large areas of the country are no-go zones for the two major political parties?” Many demonstrators are loyal to Thaksin, a 60-year-old billionaire who won over the poor in the northeast of the country by giving them cheap health care and loans. The demonstrators, angered by one of Asia’s widest income gaps, say Abhisit, 45, embodies a privileged class of military officers, judges bureaucrats and royal advisers that sits above the law. Thaksin, who was ousted by the Thai army in 2006, fled the country in 2008 before a court sentenced him to two years in prison for helping his wife buy land from the government while still in power. King Bhumibol Since 1946, when King Bhumibol Adulyadej took the Thai throne as an 18-year-old, Thailand has seen nine coups and more than 20 prime ministers. Only two of 17 constitutions since absolute monarchy ended in 1932 have mandated parliaments that are entirely elected. The king, who is revered across the nation, has been in hospital since Sept. 19 and hasn’t spoken publicly about the current demonstrations. Abhisit’s party hasn’t won the most seats in a nationwide vote since 1992. He was picked by legislators in December 2008 after a court dissolved the pro-Thaksin ruling party for election fraud. The decision coincided with the seizure of Bangkok’s airports by protesters wearing yellow shirts who oppose Thaksin. To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

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Stuart Appelbaum: Personifying Corporate Greed

May 18, 2010

A few months ago, Bob Moore, founder and owner of Bob’s Red Mill, an extremely profitable grain company, decided to turn ownership of his multi-million dollar company over to his employees. Bob said he felt an obligation to those who have helped him build his business. An extraordinary — and unusual — move for a CEO. Most CEOs in this country — and most corporations — are driven by stock prices and answering to shareholders, not workers. There’s no clearer example in the food-manufacturing sector right now than Dr. Pepper Snapple Group and its CEO Larry Young. Larry is the poster child for corporate greed. More than 300 full-time manufacturing workers at the Mott’s applesauce plant in upstate New York have been attempting to bargain a new contract with Dr. Pepper Snapple, of which Mott’s is a subsidiary. “Bargain” is not what Larry Young and DPS had in mind. They simply demanded a long list of concessions: a pay cut followed by a wage freeze. A pension freeze for current workers and pension elimination for future workers. A decrease in employer contributions to the 401K. An increase in employee contributions and co-pays for health care. Typically, when a company is looking for these kinds of concessions, it’s because they are struggling financially. Not so in this case. DPS just came off its most profitable year in the past five fiscal years: $5 billion in sales and $555 million in net profit in 2009. They expect net sales in 2010 to increase 3% to 5%, in part driven by growth in Mott’s — the Mott’s line of apple products is the #1 brand of apple juice and applesauce in the United States. Larry Young has complained to the press that the salaries of Mott’s workers have gone up 10% over the past three years. He believes that labor is a “commodity,” and with unemployment so high in the area his company can cut wages and pay less for the “commodity.” DPS says they want to make a “correction” to the wages and benefits of the Mott’s workers. The fact is that Larry earned $6.5 million in total compensation last year — he’s doubled his salary since 2007. That’s right, his salary has gone up more than 100% over the past three years while the company has earned record profits. So let’s just call this what it is: corporate greed. This is a prime example of corporate America attempting to undermine wage and benefit standards at a time when workers can least afford it. It’s about taking family-sustaining jobs in this country and reducing them to a shell of what they used to be. It’s about making shareholders rich by making a buck off the backs of workers. For a worker like Jim Mitchell, who has worked at the Mott’s plant for 34 years, the $1.50 cut is a 9% cut in his overall wages. Combined with increased health care costs, he and his wife will not be able to meet their monthly bills. Tim and Joann Budd have worked at the plant for 24 years. They have five kids, including a daughter with lupus; Tim gave her his kidney. The cuts will make it very difficult for the Budd’s to provide for their family. Larry Young probably doesn’t worry about how he’ll provide for his family. You don’t have to when you’re squeezing money out of the employees who helped build your business. Wonder what the folks at Bob’s Red Mill would think?

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Jennifer Openshaw: "Flexibility" is New Key to Success in New Economy

May 17, 2010

Want to get ahead? Or, rather, help your kids get ahead? It’s no longer “excel at one thing,” as Google exec Sean Harvey told a group of students at a SuperFutures “Discover Your Future” seminar over the weekend. But, rather, it’s about “doing multiple things well.” It’s exactly the conversation I had had with my husband just a couple weeks back: What does it take to succeed? Twenty years from now, when my daughter is just entering the work force, what will it be like? More importantly, what tools will she need to survive and thrive? It’s daunting when you think about the global environment, the automation of jobs, and the continual push to increase productivity. It’s the new economy in which we live. Harvey, who joined me along with radio exec Dick Ferguson, underscored his point with his own story. Used Computers “Zero” Harvey said he “used computers a grand total of zero times in high school” but says he now runs “a scary amount.” It wasn’t until his wife nudged him to do something more lucrative that he left writing travel books and moved onto writing tech manuals for ad giant DoubleClick. The firm was later bought by Google. Harvey now runs display ad businesses for the software giant. Harvey said that while he got to Google in a “not-so-obvious way,” he attributes his success to the fact that he got started early working hard at something that he was passionate about, and never stopped learning. “That got me very far in the job world, ridiculously far.” “This is an exciting time in the world,” he added. “As long as you’re excited, the work won’t be painful and opportunities will open up along the way. My career is about money, but it’s also about having fun and doing things I never thought I could do before.” Key #2: Flexibility The second key, Harvey said, is flexibility. In the “old days,” he pointed out, “it used to be one job, one skill.” “Today, companies aren’t hiring for a specific position but rather people who are smart and flexible. The way you demonstrate that is by showing you can do multiple things well.” I couldn’t have said it better. Harvey said community involvement is just one example where young people can show their flexibility and curiosity. That means start a project, be a leader, take on a task — anything (check out SuperFutures Global Leader Program helping teens turn passions into impact) “Today, it’s more about: ‘Am I the kind of person who’s flexible and can do different things?’ It’s different from the world our parents were in.” A one-time musician, Harvey said that some might not see that experience as valuable. “Being a musician shouldn’t have had any benefit to my job, but it has. People find it interesting and it impresses people — and that helps me in my job today.” Key #3 — High-end Skills Finally, Harvey pointed out that the winners in the U.S. will be those with “high-end, valuable skills.” For young people, that means thinking about what skills are missing but needed. He said computer programming is “so desperately needed in the US that if you learn how to code and learn a computer language, it will virtually be impossible not to be working.” “We are importing thousands of software engineers because our schools are not training enough of them,” he added. “It’s a key toward permanent high paid employment.” This is all so different from our parents and even our grandparents’ economy in that jobs aren’t as secure. Harvey said being in the software business is about as secure as it gets, but “you should assume it’s never secure.” Isn’t that the one big lesson from this recession? And that’s precisely why it’s all about flexibility in today’s economy. SuperFutures will hold another Discover Your Future seminar and will be adding new online programs available nationwide. To learn more, visit www.superfutures.org or get notified here. Through classes and coaching, SuperFutures help teens turn their passions into impact and, in the process, teaches them real-world skills needed to succeed in college, career and life. SuperFutures’ Jennifer Openshaw started the organization after talking to teens about the fears and stress related to transitioning to the working world and parents’ own stories of changing careers later in life because they failed to have a “SuperCoach” early on.

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Cameron Leads First U.K. Coalition Since World War II With Clegg as Deputy

May 12, 2010

By Robert Hutton and Thomas Penny May 12 (Bloomberg) — Conservative leader David Cameron struck a deal with Britain’s No. 3 party to form the first coalition government since World War II, ending 13 years of Labour control. “We have deep and pressing problems,” Cameron said following his arrival at the prime minister’s Downing Street residence 90 minutes after Gordon Brown ’s departure last night. “For those reasons, I aim to lead a proper and full coalition. That’s the right way to provide this country with the strong and stable, good and decent government this country needs.” Cameron, 43, replaced Brown after five days of unprecedented talks following elections May 6 that failed to produce a majority for the first time since 1974. His coalition partner, Nick Clegg , head of the Liberal Democrats, became deputy premier. They’ll propose 6 billion pounds ($9 billion) of cuts within 50 days to reduce a record budget deficit , raise the threshold to pay income tax, study a split between retail and investment banking and increase the Bank of England’s oversight of the financial industry, Conservative officials said. With 363 lawmakers in the 650-seat House of Commons , the two-party government may ease investor concern that last week’s inconclusive vote would leave Britain with a leader too weak to fix U.K. finances. The pound and gilts rose yesterday after reports that Cameron was set to succeed Brown. Sterling added 0.7 percent to $1.4956 before slipping to $1.4928. The 10-year gilt yield fell 4 basis points to 3.88 percent. ‘Market’s Favorite’ “A Conservative-Liberal democrat coalition is the market’s favorite outcome,” said Philip Shaw , chief U.K. economist at Investec Plc in London. U.K. government debt will rise to 77 percent of gross domestic product this year and may approach 100 percent by 2014, Standard & Poor’s says. The rating company cut its outlook on the U.K.’s AAA grade from stable in May 2009, saying debt may rise to a level incompatible with its top assessment. “We’re going to form a new government and more important than anything else a new kind of government,” Clegg told reporters after his party approved the deal early today. “I believe we are united in wishing to tackle the immense challenges this country faces and deliver a fairer future for Britain.” Winston Churchill With the deal struck, Cameron and Clegg, 43, each have to overcome skepticism over allying with a traditional antagonist. The Liberals haven’t had a role in government since Winston Churchill led a unity Cabinet 65 years ago. Conservatives have been out of power since 1997. “I would rather be in a minority government,” Conservative lawmaker Graham Brady said. “Realistically, there’s not much more prospect of whatever arrangement is reached lasting for very long.” “The odds are against it lasting four years,” said Andrew Russell , a lecturer at Manchester University, and author of “Neither Left Nor Right,” a history of the Liberal Democrats. “It’s possible it could last a couple of years. A lot depends on personal chemistry.” Buckingham Palace Standing outside his official residence in London, Brown announced his resignation and then travelled the mile to Buckingham Palace to tender his resignation to Queen Elizabeth II and recommend Cameron as his successor. She then summoned Cameron and asked him to form a government. In the May 6 election, the Conservatives won 306 districts, a net gain of 97 from the previous election in 2005. Labour had a net loss of 91 seats to end with 258. The Liberal Democrats lost five seats and now have 57 members of Parliament. The Conservatives and Liberal Democrats agree to reconcile campaign differences over Cameron’s proposals to cut spending and lower inheritance taxes and Clegg’s bid to eliminate income taxes on those with the lowest incomes and loosen immigration rules. There are also disagreements over policy toward the European Union. Clegg favors dropping the pound for the euro under the right circumstances, a stance opposed by Cameron. The parties agreed Britain wouldn’t join the euro . Sarkozy, Merkel Clegg attacked the Conservative leader during an April 15 debate over his decision to pull his party out of an alliance in the European Parliament with French President Nicolas Sarkozy and German Chancellor Angela Merkel and join up with euro- skeptic east Europeans. The Liberal Democrat called the Conservatives’ new allies “a bunch of nutters, anti-Semites, people who deny climate change exists, homophobes.” U.S. President Barack Obama called Cameron to congratulate him and invite him to the U.S. later this year. Merkel also called Cameron last night. At 43 years and seven months, Cameron is the youngest U.K. leader since 1812. Tony Blair was four days short of his 44th birthday when he took office in 1997. Cameron has infuriated some on his own side since he became Conservative leader at the end of 2005 with his efforts to reach out beyond traditional supporters. He put forward a pro-gay rights agenda and opposed building another runway at London’s Heathrow Airport on environmental grounds. Cameron and his wife Samantha divided their time between the North Kensington district of west London where they have their main home and the district he represents in Parliament, Witney, 70 miles (110 kilometers) west of London. Genetic Illness The couple has two young children and a baby due in September. Last year their first son, Ivan, who suffered from a rare genetic illness, died at the age of six. Cameron is the kind of Conservative leader Britain hasn’t seen in decades: someone from a wealthy background who went to Eton, Britain’s most famous private school. His ancestors include King Henry VII, who ruled in the 15th century, and at least seven earls. British politics has seen a backlash against politicians from upper-class families since the mid-20th century. The last such Conservative leader was Alec Douglas-Home, a Scottish earl who in 1963 gave up the noble title he inherited from his father, and his seat in the unelected House of Lords, so he could gain election to the House of Commons and become prime minister. He lasted 12 months before losing to Labour’s Harold Wilson in the October 1964 general election. To contact the reporters on this story: Robert Hutton in London at rhutton1@bloomberg.net ; Thomas Penny in London at tpenny@bloomberg.net

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Times Square Bomb Suspect Is Cooperating After Admitting Role, U.S. Says

May 4, 2010

By Patricia Hurtado and Justin Blum May 4 (Bloomberg) — A naturalized U.S. citizen from Pakistan told prosecutors he tried to detonate a car bomb in New York’s Times Square to kill tourists and theater goers, and has been providing information on the terrorist plot, the U.S. said. Faisal Shahzad was accused of trying to “kill and maim persons” when he drove an improvised bomb into the crowded Manhattan neighborhood May 1, prosecutors said in a complaint unsealed in New York. Authorities said the plot dated back to December. Shahzad faces five counts including attempting to use a weapon of mass destruction and receiving bomb-making training in the Waziristan region of Pakistan. Shahzad was arrested last night at New York’s John F. Kennedy International Airport as he attempted to fly to Dubai. At a press conference in Washington, U.S. Attorney General Eric Holder said Shahzad admitted his role in the bombing attempt. “This was a terrorist plot aimed at murdering Americans in one of the busiest places in our country,” Holder said. Shahzad, who lived in Bridgeport, Connecticut, faces as much as life in prison if convicted. His initial appearance in federal court today in Manhattan was cancelled, the government said. Pakistani officials have arrested “alleged facilitators” in that country as part of a “far broader investigation,” Jane Harman , chairwoman of a House of Representatives subcommittee on homeland security and intelligence, said in a statement. Family Links Pakistan’s Dawn television reported that he had family links in the port city of Karachi, and visited it last year. Pakistan’s Urdu-language news channel, Aaj TV, reported that authorities there have detained 13 people in their investigation of the attempted bombing. The channel didn’t say where it got the information. Holder said the U.S. probe is continuing. “The FBI and their partners in this process have all the tools and experience they need to learn everything we can, and that includes what, if any, connection this individual has to terrorist groups,” President Barack Obama said today. Dubai-based Emirates Airlines said U.S. authorities removed three passengers from a New York to Dubai flight last night. Shahzad was arrested after the airliner left the gate and was recalled, according to a person familiar with the investigation. The suspect became a naturalized U.S. citizen in April 2009 after marrying an American, according to another federal official. Married Citizen Shahzad reported that he married Huma Mian and identified her as his spouse as he was seeking citizenship, according to the official, who spoke on condition of anonymity because of the continuing investigation. Shahzad didn’t have a criminal record, the official said. In December 1998, Shahzad was granted a U.S. visa, and he received another one in April 2002, according to the official. Shahzad was traced by law enforcement authorities through his use of a disposable cell phone, the first person familiar with the investigation said. He also was tracked while overseas and identified yesterday due to his placement on a no-fly list, said the person, who declined to be identified. Shahzad was questioned without first receiving his Miranda warnings under a federal public safety exception, the person said. The warnings include telling a suspect that he has the right to remain silent and representation by an attorney. He was given the warnings after initial questioning, the person said. Secondary Screening Congresswoman Harman said Shahzad was subjected to secondary screening when he returned from Pakistan last year and information collected then helped U.S. agents track him down. “The screening yielded critical contact information that was entered into the system and used in his arrest yesterday,” Harman, a California Democrat, said in the statement. “Dots were correctly and rapidly connected.” Shahzad was put on the no-fly list yesterday, which was still being distributed when he bought his ticket, she said. Customs and Border Protection officials, who knew Shahzad was a suspect, identified the flight he was on and removed him from the plane, Harman said. Shahzad worked for three years at a company controlled by Leon Black’s private-equity firm, Apollo Management LP. Affinion Group Holdings Inc., a provider of marketing and customer- loyalty plans, employed Shahzad as a financial analyst in its accounting department from 2006 until 2009, the company said. A Faisal Shahzad is listed in public records as having lived at addresses in Bridgeport and Shelton, Connecticut, about 60 miles from Manhattan. Today, police in Bridgeport searched a home on Sheridan Street where neighbors said Shahzad once lived. Bridgeport Home Jose Nieves and Luz Caban, an engaged couple who live across the street from the house, said they were awakened at 1 a.m. by Bridgeport police who shined flashlights in their window, telling them to leave. “I was scared,” Caban said. “I thought someone was going to rob us.” Caban, 30, said he had seen Shahzad around the neighborhood, but didn’t have closer contact. Marilyn Osoria, who lives on an adjacent street, said her children saw Shahzad loading boxes in his home last summer. “He stuck out to them because he wasn’t dressed in normal clothes,” Osoria said, describing him as wearing a flowing garment. She added that he was accompanied by a teenager. LaVonne Muse, who lives behind the house, said police and federal agents removed computers and electronic equipment from the house today. She was evacuated due to a bomb threat, she said. Previous Home At his previous home in Shelton, about 10 miles north of Bridgeport, Shahzad’s neighbors said he dressed in normal clothes while his wife wore traditional Muslim clothing. Neighbor Mary Ann Galich, who lived in a house behind the suspect, said “to me, it felt like he was a normal person.” In September, according to state court records, Chase Home Finance LLC brought a property foreclosure action against a Faisal Zhahzad and Huma Mian in Milford, a town east of Bridgeport near the city of New Haven. The bomb-laden 1993 Nissan Pathfinder Shahzad allegedly parked off Times Square 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 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 Detonator The intended detonator, the police commissioner 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, he said. Bloomberg said today at a press conference that “this was an act that was designed to kill innocent civilians and strike fear into the hearts of Americans and I am happy to say that it failed on both counts.” He added that the city “will not tolerate any bias or backlash against Pakistani or Muslim New Yorkers.” The police presence has been increased in the Times Square area. The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP. The case is U.S. v. Shahzad, 10-00928, U.S. District Court for the Southern District of New York (Manhattan). To contact the reporters on this story: Patricia Hurtado in Manhattan federal court at phurtado@bloomberg.net and; Justin Blum in Washington at jblum4@bloomberg.net

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Brown Taps Thatcher’s Legacy of `Poll Tax,’ Asset Sales to Counter Cameron

May 4, 2010

By Robert Hutton May 4 (Bloomberg) — British Prime Minister Gordon Brown wants voters to think about one politician in the election in two days, and it’s not him. Twenty years after she left office, it’s Margaret Thatcher who features more than anyone else in Labour advertising. In swing districts, Brown invokes her spending cuts to remind voters why they turned against the Conservatives in the 1990s. Labour’s effort to tie Conservative leader David Cameron to Thatcher’s legacy may help explain why he has been unable to widen his lead over Brown, who polls show may win Labour’s smallest share of the vote since 1983 in the May 6 election. The result may be a hung Parliament, where no party wins a majority, unsettling investors concerned that such a government may be too weak to cut a record budget deficit . “Labour is banging the drum that the Conservatives haven’t changed,” said Philip Norton , author of “The Conservative Party” and professor of politics at Hull University. “Thatcher was a divisive figure.” A ComRes Ltd. poll for ITV News and the Independent newspaper last night showed Conservative support at 37 percent, Labour at 29 percent, and the Liberal Democrats at 26 percent. That would give the Conservatives 294 seats, 32 short of a majority in the House of Commons , Labour 251 seats and the Liberal Democrats 74, ComRes said. The polling company telephoned 1,024 voters on May 1 and 2. Seven-Point Lead A YouGov Plc poll for The Sun newspaper gave the Conservatives 35 percent support, with Labour and the Liberal Democrats both at 28 percent. That gives the Conservatives 277 seats, 15 more than Labour, according to the BBC’s seat calculator . YouGov questioned 1,455 people May 2 and yesterday. No margins of error were given for the polls. A Crosby/Textor poll of swing districts for the Daily Telegraph suggested that the Conservatives might win 103 seats from Labour, though none from the Liberal Democrats. That’s short of the 117 districts they need to gain from other parties to ensure a majority. Cameron’s challenge is greatest in the north of England and Scotland where Thatcher’s policies of public-sector privatizations and reducing the power of unions hit hardest. In Scotland, the Conservatives, also known as the Tories, won only one out of 59 Parliamentary seats in 2005. Labour took 40, and the Liberal Democrats 11. “For me as a business owner, the Tories’ policies look slightly better, but I just have a mental hang-up about voting for them,” said Nik Wilson, 36, who runs a florist store in Edinburgh with his wife and voted Scottish National Party in the last election. “People just forget how things were.” ‘Remember the Tories’ Labour’s first television ad in Scotland was titled “Remember the Tories” and featured Thatcher’s image three times. In another Labour spot, starring the comedian Eddie Izzard , she’s the only politician mentioned. It is not just in the north of the country where Labour, which has been in power for 13 years, sees Thatcher as a handicap for the opposition. Leaflets sent out by the party in London attack Liberal Democrat leader Nick Clegg for having made positive comments about Thatcher, 84, now known as Baroness Thatcher , who lives in the capital. “The Tories haven’t changed,” says a Labour television ad that aired in Scotland. “They closed our mines, closed our steelworks and closed our factories.” ‘Big Society’ Cameron has spent the past 4 1/2 years since he became leader of his party trying to counter that, pledging to protect spending on the National Health Service, promote female, gay and ethnic-minority candidates, and repudiating Thatcher’s claim that “there is no such thing as society.” The central plank of his campaign is something he calls “The Big Society.” “To have spent any part of your adult life under Thatcher, you’d have to be 40 years old,” said David McLetchie , business manager for the Conservatives in the Scottish Parliament in Edinburgh. “But she’s still conjured up as a demon figure. She ended up as a victim of her own rhetoric.” Independent until it joined England to form the United Kingdom in 1707, Scotland still has its own legal system and prints its own version of the national currency, the pound. Like parts of northern England where the Conservatives also struggle, Scotland’s mining and industrial areas were devastated by Thatcher’s policies of selling state-run companies and breaking the grip of unions. Poll Tax Scotland is also where the program that brought her down, called by its critics the “poll tax,” was tested in 1989. The policy of replacing property taxes with a per-person charge hurt the poorest and caused riots when it was brought to England a year later, leading the Conservatives to oust Thatcher and repeal the levy. Scotland, Brown’s home, has voted Labour since 1945. Still, the Conservative vote fell to 16 percent in 2005 from 31 percent in 1979, when Thatcher was first elected. A Progressive Scottish Opinion survey last week put Labour at 41 percent, the Scottish National Party at 22 percent, the Liberal Democrats at 21 percent and the Conservatives at 12 percent. The company surveyed 1,024 Scottish adults between April 20 and 26. Cameron is campaigning in 11 Scottish districts this year, including Edinburgh South and the seat of Chancellor of the Exchequer Alistair Darling , Edinburgh South West. “There’s no sign of a Cameron bounce,” Labour’s Scottish Secretary Jim Murphy told reporters travelling with Brown to the central Scottish city of Stirling on April 27. “It’s in the bloodstream after what happened here last time. Most people here don’t think the Tory party’s changed.” While Cameron has made some progress in changing this view, the Conservatives still have an uphill climb in Scotland, said Nicola McEwen , co-director of the Institute of Governance at Edinburgh University. “Cameron’s no Thatcher, and they’re not hated up here in the way they used to be,” said McEwen. “In Scotland, a lot of people who by any objective measure are middle class will continue to identify themselves as working class. Those things run deep. The Conservatives don’t pick up those votes.” To contact the reporters on this story: Robert Hutton in Edinburgh, Scotland at rhutton1@bloomberg.net .

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BP’s Hayward Says Offshore Drilling at Risk After Gulf of Mexico Disaster

May 3, 2010

By Stanley Reed May 3 (Bloomberg) — BP Plc , owner of the ruptured well spewing thousands of barrels a day of crude into the Gulf of Mexico, may be able to manage the damage to the company and the industry, Chief Executive Officer Tony Hayward said. “It all depends on how successful we are with our response,” Hayward said in an interview in Houma, Louisiana, yesterday, when asked how bad the fallout will be. “If we deal with the situation in a way that minimizes the environmental impact, it will cause some debate. If the environmental impact is serious, as a consequence there won’t be much if any extension of offshore drilling.” The oil spill caused by the explosion and sinking of the Deepwater Horizon drilling rig last month threatens what President Barack Obama said yesterday may become “an unprecedented environmental disaster.” The April 20 accident, which killed 11 people, came at a time when Hayward appeared well on the way to turning BP around by improving the company’s safety record and profitability. The U.S. Coast Guard has said it is impossible to estimate how much crude oil is gushing from the well from at least three locations 5,000 feet (1.5 kilometers) below the surface. Obama viewed the Gulf coastline and received an hour-long briefing yesterday on how the slick is fast approaching the Louisiana coastline. Winston Churchill Hayward, 52, who said his recent schedule has left him feeling tired, repeated a phrase he says is from Winston Churchill . “When you are going through hell, keep going,” Hayward said over a fish and pasta dinner at a restaurant in Houma, near where BP has its main base for fighting the spill. Hayward has improved BP ’s safety record after a series of accidents including the deadly March 2005 Texas City refinery explosion that helped bring down his predecessor, John Browne , whom he succeeded three years ago. Hayward also brought delayed projects such as Thunder Horse in the Gulf online. As an indication of improved performance, BP said April 27 net income more than doubled in the first quarter to $6.08 billion from $2.56 billion a year earlier. Earnings excluding gains or losses from holding inventories and one-time items beat analyst estimates. BP fell 10 percent in London trading last week, the biggest weekly drop since October 2008, reflecting investor concern that the costs of containing the spill will escalate. The shares closed at 575.5 pence on April 30. Crude oil for June delivery was little changed at $86.12 a barrel in after-hours trading on the New York Mercantile Exchange at 10:26 a.m. London time, after rising 4.5 percent in the previous three sessions. Thunder Horse, Atlantis BP has pushed ahead with exploration in the Gulf of Mexico when other companies backed off. Its discoveries include last year’s Tiber find in the Gulf, which may have 4 to 6 billion barrels of oil in place. The 35,000-foot well, the deepest yet, was drilled by the Transocean Ltd. -owned Deepwater Horizon. BP now produces about 450,000 barrels a day of oil equivalent in the Gulf of Mexico, about 12 percent of its total. Oil from such sites as Thunder Horse, the second-largest producing field in the U.S., and Atlantis, is among the most profitable in BP’s portfolio. These advances have also boosted U.S. energy production. For the first time in years, the nation’s oil output is rising, with the deepwater Gulf of Mexico, contributing about 1.2 million barrels a day of new production. The U.S. produced 5.48 million barrels of oil a day in 2009, the most since 2003, American Petroleum Institute data show. BP’s offshore operations include Angola, and in March it acquired Brazilian deepwater assets from Devon Energy Corp. in a $7 billion deal. ‘Apollo 13’ Exercise The National Oceanic and Atmospheric Administration previously estimated the well is spewing 5,000 barrels of oil a day. At that rate, the volume of the spill would exceed Alaska’s 1989 Exxon Valdez accident by the third week of June. Hayward is betting on a multi-phased approach to stop the spill and limit environmental damage. BP technicians are still trying to tweak the blowout preventer that failed in the initial phases of the Deepwater Horizon accident. They are working on valves and injecting hydraulic fluid 5,000 feet below the sea surface in what Hayward said is like an “Apollo 13 exercise.” BP is also preparing to place a cofferdam over the damaged well so as to funnel oil to the surface to a separator vessel. That operation could start within a week. BP is also preparing to sink two relief wells into the reservoir. Once those are completed, heavy drilling mud will be injected into the reservoir to kill the stricken well and eventually cement it up. Ship Flotilla BP has assembled a flotilla of 100 ships to skim off oil and lay booms. It has an air force of six planes spraying dispersants. BP is also signing up fishing boats for the effort — 700 so far — and training thousands of volunteers on what to do in case oil hits the beaches. BP has arranged for Wal-Mart Stores Inc. to supply them with gloves and tools. Heavy winds and high seas have hampered BP’s efforts so far, making containment operations difficult. Hayward says the whole effort is costing about $7 million a day. BP is experimenting with injecting dispersal fluid at the point of the leak, a method Hayward thinks shows great promise. So far, the detergent-like fluid, which mixes with the released oil and gas and creates a washing-machine effect, seems to be working well, Hayward said. No oil seemed to reach the surface yesterday. Hayward plans to maintain his presence in the U.S., returning to London only when necessary, such as to visit his wife last week after an operation. In Houma he stays at a Ramada Inn, along with many of the people working for BP on the spill. Noting that he has spent his first three years as CEO restoring BP’s fortunes, he said: “My task for the next three years is to put this event behind us.” To contact the reporter on this story: Stanley Reed in London at sreed13@bloomberg.net

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Oil Spill Gulf Of Mexico 2010: Congress Demands Answers From BP, TransOcean As Feds Launch Investigation

April 27, 2010

As the massive oil spill caused by the worst rig explosion in decades continues to spread across the Gulf of Mexico, more questions are being raised about the safety procedures and environmental response plans of BP and TransOcean, the oil behemoth and contractor drilling the well. On Monday, the Huffington Post reported that BP and Transocean, along with dozens of other members of the oil industry, have vigorously opposed new safety regulations proposed last year by a federal agency that oversees offshore drilling. The new regulations, which have been attacked by the industry in over 100 letters sent to the agency, were prompted by a study showing many accidents on such rigs from 2001 to 2007. In addition, a lawsuit filed by the wife of one of the 11 oil workers presumed dead in the accident claims that the companies violated “numerous statutes and regulations” issued by federal agencies. The cause of the explosion has not been determined. Now, members of Congress are demanding answers from the companies and the agency and administration officials have launched a full investigation of the incident. Homeland Security Secretary Janet Napolitano and Energy Secretary Ken Salazar announced a joint investigation into the incident, with the power to issue subpoenas, hold public hearings and call witnesses. “We will remain focused on providing every resource we can to support the massive response effort underway at the Deepwater Horizon, but we are also aggressively and quickly investigating what happened and what can be done to prevent this type of incident in the future,” said Salazar. Sen. Robert Menendez (D-N.J.) wrote a letter to MMS on Tuesday, demanding that the agency “stand up to industry pressure, and finalize its proposed rulemaking” to require operators to develop and implement a safety and environmental management plan for offshore oil and gas development. He continues: Until the investigation is complete we have no way of knowing whether this rule could have prevented the tragedy at the Deepwater Horizon oil rig, but if this rule can make oil rig operations safer then we should finalize the rule as soon as possible. I understand BP and other major oil operators have opposed this rulemaking, but given the current tragedy unfolding in the Gulf of Mexico it seems clear that tighter safety procedures are in order. In addition, the House Committee On Energy and Commerce announced an investigation into the companies’ environmental response plan to the incident, including “the adequacy of the companies’ risk management.” Chairman Henry A. Waxman (D-Calif.) and Subcommittee Chairman Bart Stupak (D-Mich.) sent letters to Lamar McKay, the chairman and president of BP America, and Steven Newman, president and CEO of TransOcean. Also, BP is being investigated by MMS over a whistleblower’s claims that the company violated federal law by not keeping key documents related to another deepwater production platform in the Gulf of Mexico, reports the Guardian . Spokespersons for BP and TransOcean did not return calls for comment. Read the letter from Sen. Menendez to MMS: 20100427150956845

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Paul Nawrocki, Sandwich-Board Job Hunter, Finds Work After 2 Years

April 25, 2010

NEW YORK — When laid-off toy company executive Paul Nawrocki hit the streets of Manhattan wearing a sandwich board and handing out his resume, he became the face of the recession. At the end of 2008, with the giants of Wall Street collapsing and bank accounts dwindling, this lone, mustachioed job hunter with the sign proclaiming he was “almost homeless” seemed like a mirror of a slumping nation’s fears and troubles. Nawrocki appeared on CNN and was shadowed by South American photojournalists. In a handful of weeks, he gave more than 100 interviews in TV studios and on the street. He began to think of his photograph like a Post-it note – stuck next to seemingly every article about the economy. The world decided he was a weather vane for the nation’s economic troubles. And maybe he was: Even though the attention faded, his troubles did not. Having the eyes of the world on him didn’t land the then-59-year-old any viable job interviews. His wife was sick, and keeping his health care was a struggle. He began to decide between the doctors and the mortgage. Well, if Paul Nawrocki is a sign of the times, then times are looking up. Because last month, after collecting 99 weeks of unemployment, Nawrocki finally found a job. He’s not the only one. While unemployment remains high, the nation added 162,000 jobs last month – the first significant job growth since the downturn began. “It was good. It felt good,” the Beacon, N.Y., resident says of his first day back at an office – 25 months after he was asked to leave his old one. “It felt like all new again because it had been so long.” Nawrocki hopes he’s back on his feet after the long, dark stretch. But he knows he’s still on shaky footing. The financial damage of the last two years won’t just disappear. “We’re still not out of the woods,” he says now. He has two mortgages on his home 70 miles north of Manhattan. “One of our mortgages – I’m like six months behind. I don’t know how I’m going to be able to catch up.” Nawrocki and his wife declared bankruptcy last year. They got food stamps. They went to food banks. They took gifts from family. For months, he’s been waiting fearfully for his mortgage company to call – waiting for a foreclosure notice, for something. But so far, nothing has happened. In the end, his path back to work wasn’t through his television appearances, but through old-fashioned networking. He went to a toy-industry fair, and a friend introduced him to the man who would become his boss. Nawrocki believes the tales of his sandwich-board days helped him land an interview. His paycheck is nearly half the size; he had made almost $100,000 a year. And his title is a little less grand. But the job still seems a wondrous, unlikely rescue – as though a hand had descended from the sky at the last possible moment. “I had reached the limit, the last week,” he recounted. “And they called and had me start the next week. … Through this whole experience it’s been like that. We get right to the edge, and then …” he trails off. And then. Hope returns.

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Kevin Connor: Obama Needs to Turn His Back on Goldman’s Support

April 23, 2010

In the wake of the historic fraud suit against Goldman Sachs, it was unclear whether the bank would have any presence at President Obama’s financial reform speech yesterday. But CEO Lloyd Blankfein chose to attend, along with his number two, Gary Cohn . Why? The President invited them. Instead of getting a tongue-lashing for their fraudulent ways, the President asked them to join him in the fight for financial reform. If Obama is to be a credible voice for financial reform, and for a just and sustainable economy, he needs to turn his back on Goldman Sachs and other financial behemoths — including hedge funds like John Paulson’s premised on a business model of outright deception and collusion. Symbolic gestures won’t do it. One strategy: he could refuse all future campaign donations from individuals associated with these firms. Goldman Sachs has enormous influence over this White House, in large part because of the role the bank played in helping elect Obama. The fact that Goldman was Obama’s top corporate contributor does not begin to illustrate the central role the bank’s networks played in Obama’s campaign — not just current employees and executives, but, crucially, Goldman alumni. These quiet players have not gotten much attention, but their significance to the Obama campaign cannot be overstated. One of these Obama supporters is former Goldman Sachs executive Richard Perry , now a hedge fund manager. During the 2008 campaign, Perry hosted a pivotal meeting between Obama and Caroline Kennedy. At the time, Hillary Clinton was still in the race; after winning Caroline Kennedy ‘s support, Obama emerged as the chosen candidate of an extremely influential arm of the Democratic Party elite. The New York Post has described this as ” a move some credit with helping Obama score the Democratic nomination over Sen. Hillary Clinton .” Perry’s support is all the more notable for the fact that he and his wife had been Hillary Clinton bundlers. He may have been brought on board by his mentor at Goldman Sachs, Robert Rubin . In addition to working for Rubin, Perry babysat for his children and taught classes with him. Rubin’s fingerprints are all over the Obama campaign: longtime right-hand man Michael Froman , who followed Rubin from the Treasury Department to Citigroup, played a central role in early fundraising efforts, lining up an unrivalled fundraising team of politically-interested financiers in early 2007. Froman was later charged with picking economic appointments for the Obama administration, along with Rubin’s son, Jamie. Then there are people like David Heller , co-head of Goldman’s securities division; Frank Brosens , a hedge fund manager and formerly a Goldman trader under Rubin, and at one point Obama’s pick to oversee TARP; Bruce Heyman , a Goldman managing director in Chicago; Eric Mindich , a hedge fund manager and former Goldman trader under Rubin; Jim Johnson , a Goldman director and chair of the compensation committee — in charge of approving all those exorbitant bonuses. Johnson was Obama’s choice to lead his search for a vice president before his ties to Fannie Mae got him in trouble. All five were Obama bundlers, and all five had strong ties to Goldman Sachs. They raised at least $850,000, and possibly as much as $2.1 million for Obama. That’s more than double the amount given to Obama by current Goldman executives ($1 million), all raised by a handful of people in the Goldman alumni network. You can bet that all of these individuals hold Goldman Sachs near and dear to their hearts. What has all this money won Goldman’s network? One need look no further than White House visitor logs to get an idea of the extent of the bank’s influence over this administration. In a study of the logs earlier this year, citizen analysts at LittleSis.org found that more high-powered visitors to the White House had ties to Goldman Sachs than any other business in the country . We looked for individuals who had attended small group or one-on-one meetings with the President or one of his top advisors, identified them, and analyzed their relationships. Out of a list of 250 visitors, seven current and former Goldman employees had attended such meetings, based on our study of available logs. Morgan Stanley and the New York Times were next with six each. And now one former White House official, Greg Craig , has been hired by Goldman to help it clean up its legal mess. Against this backdrop, Obama’s insistences that he is independent of Goldman Sachs look extremely disingenuous, and rumors that he pressed the SEC to sue Goldman seem far-fetched. Obama’s coziness with Goldman Sachs poses a serious political liability in the months ahead. During Bush’s second year, a wave of corporate crises took down several large corporations, including that reigning symbol of corporate corruption, Enron. Bush took heat for his close ties to “Kenny boy” and his mismanagement of the crises, and his approval ratings began dropping . Businesses like Enron may have put him in the White House, but they also threatened to take down his presidency. The run-up to the Iraq War eventually distracted Americans from this shameful cronyism. Ironically, Enron was just as close with members of the Clinton administration, and its fraud was aided and abetted by Clinton-backed legislation. But Bush took the heat, for good reason: he was the Enron crony in power. And even though Republicans also have strong ties to Goldman Sachs (see: Hank Paulson), Obama will take heat because he is the Goldman Sachs crony in power. Fox News has already begun their drumbeat, but Obama’s ties to Goldman are simply too strong for more mainstream outlets to ignore. How will Obama deal with the political liability of being Goldman’s favorite politician, and hold on to the support of voters? Yesterday, he chose to ignore it, but this strategy will almost certainly backfire as the scandal grows and the media begins linking Obama with Goldman. But Obama does have options for addressing these issues. He is not a former Goldman Sachs executive, and he has never worked on Wall Street. He has a significant opportunity to distance himself from Wall Street’s culture of fraud by turning his back on his big-dollar Wall Street donors, and embracing the support of his small-dollar ones. By making a firm pledge to reject all future donations from individuals associated with the big banks and hedge funds, he can credibly demonstrate his political independence to the American people. Of course, as long as he continues to invite Goldman Sachs to join him — on his campaigns, at his speeches, in the White House — the fight against Wall Street’s fraud is a fight against the Obama administration.

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Clinton Says He Got Wrong Advice on Derivatives

April 18, 2010

By Joshua Zumbrun April 18 (Bloomberg) — Former President Bill Clinton said his Treasury Secretaries Robert Rubin and Lawrence Summers were wrong in the advice they gave him about regulating derivatives when he was in office. “I think they were wrong and I think I was wrong to take” their advice, Clinton said on ABC’s “This Week” program. Their argument was that derivatives didn’t need transparency because they were “expensive and sophisticated and only a handful of people will buy them and they don’t need any extra protection,” Clinton said. “The flaw in that argument was that first of all, sometimes people with a lot of money make stupid decisions and make it without transparency.” “Even if less than 1 percent of the total investment community is involved in derivative exchanges, so much money was involved that if they went bad, they could affect 100 percent of the investments,” Clinton said. The show was taped yesterday and broadcast today. Tighter regulation of derivatives trading is part of a package of financial reforms being pushed by the Obama administration against Republican opposition. The Senate is debating a bill introduced by Banking Committee Chairman Christopher Dodd that would also give the federal government the authority to unravel institutions whose failure threatens the financial system. Bush Blamed Clinton also said the Bush administration contributed to the financial crisis with lax regulation. “I think what happened was the SEC and the whole regulatory apparatus after I left office was just let go,” Clinton said. If Clinton’s head of the Securities and Exchange Commission, Arthur Levitt , had remained in that job, “an enormous percentage of what we’ve been through in the last eight or nine years would not have happened,” Clinton said. “I feel very strongly about it. I think it’s important to have vigorous oversight.” Levitt is a director of Bloomberg LP, parent of Bloomberg News. Levitt and Rubin declined to comment. Press aides for Summers didn’t respond to requests for comment. Summers, director of Obama’s National Economic Council, said in a Bloomberg Television interview last week that the Obama administration supports “the principles that derivatives need to be traded in the sunshine, that there needs to be centralized clearing.” Rubin’s Testimony In April 8 testimony before the Financial Crisis Inquiry Commission, Rubin said “derivatives should be subject to collateral and margin requirements, standardized derivatives should be exchange traded, and customized derivatives should have a clearinghouse or, at least, greater disclosure requirements.” Clinton also said that Republicans who controlled Congress would have stopped him from trying to regulate derivatives. “I wish I had been caught trying,” Clinton said. “I mean, that was a mistake I made.” Clinton said Republicans will fall short of retaking Congressional majorities in the 2010 election. “I think the outcome is likely to be far less dramatic than it was in ‘94,” Clinton said. In the 1994 election, after Clinton’s second year as president, the Republicans captured majorities in the House and Senate. “If history is any guide they should make a few gains, but I — I don’t expect them to win in either house.” Supreme Court Clinton said that Obama should appoint a progressive to the Supreme Court. “Because Justice Stevens was part of the four- person progressive block, he will of course nominate someone who will be part of that,” Clinton said, referring to retiring Justice Clinton, 63, said both he and his wife, Secretary of State Hillary Clinton , 62, are too old to be a good choice for the court, and that the president should pick someone 10 or 15 years younger. He also suggested considering candidates who don’t have judicial backgrounds. “Have we gone too far in this process that assuming only judges can be elected? That somehow you’re not qualified if you weren’t a judge.” Clinton said. “Some of the best justices in the Supreme Court in history have been nonjudges.” Oklahoma City Parallels Clinton also said that as he began preparing for the anniversary of the 1995 bombing of a federal office building in Oklahoma City, he saw “a lot of parallels” between the early 1990s and today. “Both the feeling of economic dislocation and the level of uncertainty people felt,” Clinton said. “The rise of kind of identity politics. The rise of the militia movements and the right-wing talk radio.” “A lot of the things that have been said create a climate in which people who are vulnerable to violence — because they are disoriented like Timothy McVeigh was — are more likely to act,” Clinton said. McVeigh, a former U.S. Army member, on April 19, 1995, detonated a truck bomb outside the Alfred P. Murrah federal building in Oklahoma City, killing 168 people. McVeigh was executed in 2001. “We all have to be careful,” Clinton said. “We ought to remember after Oklahoma City.” To contact the reporter on this story: Joshua Zumbrun in Washington at jzumbrun@bloomberg.net

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Polish-Russian Reconciliation Highlights Kaczynski’s Funeral in Krakow

April 18, 2010

By David McQuaid and Nathaniel Espino April 18 (Bloomberg) — Poland bid farewell to President Lech Kaczynski and his wife in the country’s ancient capital of Krakow as the leaders of the country’s two historic enemies, Germany and Russia, prayed amid calls for reconciliation. Russian President Dmitry Medvedev lit a candle at the service for presidential couple, who died on April 10 when their plane crashed in Smolensk, Russia, on the way to a ceremony in Katyn forest honoring 22,000 Polish officers and officials killed in 1940 by Soviet dictator Josef Stalin ’s secret police. Medvedev and German President Horst Koehler were among 700 foreign guests, Polish government officials and family members gathered at the 14th-century St. Mary’s Basilica on the medieval Market Square, where a Mass led by Cardinal Stanislaw Dziwisz , archbishop of Krakow and the former secretary to Pope John Paul II , opened to the strains of Mozart’s Requiem. “Seventy years ago Katyn divided two nations,” Dziwisz said at the beginning of the Mass, addressing his words directly to the Russian president. “The tragedy eight days ago has released stores of good will in individuals and nations, and the sympathy and support we have received from our Russian brothers revives hope for reconciliation.” Closed Airspace Ash from Iceland’s 5,500-foot Eyjafjallajökull volcano closed airspace over Europe and led U.S. President Barack Obama , German Chancellor Angela Merkel and French President Nicolas Sarkozy to cancel plans to attend. Other delegations struggled to arrive on government planes with clearance to fly at low altitudes, or by helicopter, rail or road. Georgian President Mikheil Saakashvili flew to Rome and Istanbul, then made stops in Bulgaria and Romania before his plane made it to Krakow in the late afternoon, his spokeswoman Manana Manjgaladze said by phone from the capital Tbilisi. During Georgia’s 2008 military conflict with Russia, Kaczynski collected the presidents of Estonia, Lithuania and Ukraine for a joint trip to the country’s capital, Tbilisi, in a show of support. The call for improved ties between Russia and Poland overshadowed disruptions from the volcano. ‘Respect’ “President Medvedev and Prime Minister Vladimir Putin get a lot of respect from us, both for their solidarity and because they acknowledged the Katyn crime. I think Polish-Russian relations may really get better,” said Radoslaw Kruszak, 30, who waited with thousands of others to watch the funeral via a telecast. Medvedev, who is making his first official visit to Poland, met with Polish Prime Minister Donald Tusk and parliamentary speaker Bronislaw Komorowski at Wawel Castle before the funeral Mass began, PAP newswire reported. Kaczynski, his wife Maria, and 94 other officials including central bank Governor Slawomir Skrzypek and the top four leaders of Poland’s armed forces were victims of the April 10 crash. The Kaczynskis’ remains were moved at a slow walk after the Mass through the streets of the city’s Old Town on a military caisson followed by the country’s political elite and heads of state. Crowds stood three- and four- deep as the procession passed, clapping or standing in respect. A military band played somber marches and dirges as it moved through Krakow’s ancient cobblestone streets and up the slope of Wawel hill to the Royal Castle and Cathedral, where Cardinal Dziwisz was to lead a funeral ceremony. Church bells tolled throughout the city in tribute. Condolences After the bodies are placed in a sarcophagus of honey- colored onyx imported from Turkey, leaders of foreign delegations will present messages of condolence to the president’s family, including his twin brother Jaroslaw , the leader of Poland’s largest opposition party. People wishing to pay tribute to the fallen president began gathering in Krakow’s Old Town at 6 a.m. City officials estimated Market Square held about 15,000 onlookers, with another 100,000 watching on special television screens set up at the Lagiewniki sanctuary and the 48-hectare Blonia meadow, south and west of the city center. The Berlin Philharmonic played Richard Strauss ’s Metamorphosen, an elegy for central Europe’s destruction in World War II, for the crowds on Market Square. “Even though we’re the same age, for me President Kaczynski was a teacher of patriotism,” said Bozena Nowak, who drove overnight from Szczecin, 700 kilometers away in northwest Poland with her husband, Wieslaw, and son, Robert. “We would have come on foot if we had to,” said Wieslaw, as the family headed for Market Square. Reconciliation Sought At a ceremony yesterday in Warsaw honoring Kaczynski and the crash victims, Tusk, whose ruling Civic Platform party had often clashed with the president and his brother, called for Poles to overcome their political differences in what has been called the country’s greatest disaster in generations. “This is a serious test for all of us,” Tusk told a crowd in Pilsudski Square that police estimated at about 100,000. “Like the passengers on that airplane, we differ by background, political views and age. Our sense of community can only be preserved within us.” Poland must hold an early election by the end of June to fill the empty post of president. Komorowski, who has assumed Kaczynski’s duties and is the ruling party’s candidate for president, said he will set a date on April 21. Poland’s opposition parties and a legal opinion prepared by parliamentary experts give June 20 as the preferred election date. To contact the reporters on this story: David McQuaid in Warsaw dmcquaid1@bloomberg.net ; Nathaniel Espino in Krakow at nespino@bloomberg.net

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Warsaw Honors Kaczynski as Ash Cloud Threatens Leaders’ Travel to Funeral

April 17, 2010

By David McQuaid and Marta Waldoch April 17 (Bloomberg) — Thousands of Poles gathered in Warsaw to honor President Lech Kaczynski and 95 others killed in an April 10 plane crash. World leaders trying to fly in for his funeral tomorrow in Krakow, where Polish kings were buried, are being hampered by a cloud of volcanic ash over Europe. Sirens wailed at 8:56 a.m. in Poland’s capital, marking the moment Kaczynski’s plane crashed in Smolensk, Russia, where he was to attend a ceremony honoring more than 22,000 Polish officers and officials killed by Stalin’s secret police. At noon, Prime Minister Donald Tusk , whose ruling Civic Platform party had often clashed with Kaczynski and his twin brother Jaroslaw , the leader of the largest opposition party, called for Poles to overcome their political differences. “This is a serious test for all of us,” Tusk told a crowd in Pilsudski Square that police estimated at about 100,000. “Like the passengers on that airplane, we differ by background, political views and age. Our sense of community can only be preserved within us.” All Polish airspace is closed indefinitely to passenger flights, Grzegorz Hlebowicz , a spokesman for the Polish Air Navigation Services Agency , said by phone today. Ash from Iceland’s 5,500-foot Eyjafjallajökull volcano forced closures in Russia and northern Italy and cut the chances leaders such as U.S. President Barack Obama will make it to the funeral. ‘Wait and See’ “We’ll have to wait and see how the situation develops,” Piotr Paszkowski , a spokesman for the Foreign Ministry in Warsaw, said by phone. Dignitaries from India, South Korea, Mexico, New Zealand, Egypt and Pakistan have canceled plans to attend, according to an updated list on the Ministry’s Web Site. The late president and his wife are to be buried in Krakow’s Wawel castle, the resting place of Poland’s medieval kings. Russian President Dmitry Medvedev , German Chancellor Angela Merkel and French President Nicolas Sarkozy are also scheduled to attend the funeral tomorrow. Family members want the ceremony to begin as scheduled “under any circumstances,” Jacek Sasin, a minister in the presidential administration, said yesterday when asked whether heads of state would be forced to cancel. Those still planning to attend include Sarkozy, Italian Prime Minister Silvio Berlusconi and Ukrainian President Viktor Yanukovych . German Chancellor Merkel also intends to be at tomorrow’s funeral after her return flight from the U.S. was diverted to Lisbon and Rome. She then switched to road transport north, a government spokeswoman said. Obama Detour Obama’s aides are considering a longer flight route to allow the U.S. president’s plane to detour around the ash plume, according to an e-mail from the office of White House Press Secretary Robert Gibbs . Warsaw’s downtown streets, closed to traffic, were filled with pedestrians headed for Pilsudski Square, where the memorial services were held. The crowd gathered there in the early morning included uniformed delegations of miners, war veterans, police, firefighters and scouts, all bearing banners. “I came to pray for the dead and to show their families I care,” said retired engineer Jerzy Nowicki, who traveled about 210 kilometers (130 miles) by bus from Torun in northwest Poland. Kaczynski, his wife Maria, and officials including central bank Governor Slawomir Skrzypek and the top four commanders of Poland’s armed forces were among 96 people killed in a plane crash outside Smolensk, Russia on April 10. Early Election Poland must hold an early election by the end of June to fill the empty post of president. Bronislaw Komorowski , the parliamentary speaker who has assumed Kaczynski’s duties and is the ruling party’s candidate for president, said he will set an election date on April 21. Poland’s opposition parties and a legal opinion prepared by parliamentary experts give June 20 as the preferred election date. The edge of the ash cloud was forecast to reach as far south as northern Italy and Romania and as far east as the borders of Kazakhstan today, according to the Met office, the U.K. government forecaster. There have been no landings today at Balice airport near Krakow and at the secondary airfield for guests in Pyrzowice, about 100 kilometers (60 miles) west of Krakow, representatives of the airports said. Visual Flight “We can handle takeoffs and landings, but only for airplanes using visual flight rules,” Justyna Zajaczkowska, a spokeswoman for the Balice airport, said by telephone. Poland, which has closed its air space to passenger traffic, will allow flights by government, military or private aircraft at altitudes below 6,000 meters. Still, the threat posed by volcanic ash to aircraft engines means “they won’t do it, because they might kill themselves,” David Learmount , a former U.K. Royal Air Force pilot and air-safety editor at Flight International Magazine, said by phone. European airlines canceled more than 70 percent of their flights as most of the continent’s northern and central nations remained closed to air traffic. Accuweather predicted little change until April 22. To contact the reporters on this story: David McQuaid in Warsaw dmcquaid1@bloomberg.net ; Marta Waldoch in Warsaw at mwaldoch@bloomberg.net

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Steven Hill: Happy Tax Day: Are Americans getting our money’s worth?

April 15, 2010

Most Americans seem to regard April 15 — the day income tax returns are due to the Internal Revenue Service — as a recurring tragedy on the order of a Biblical plague. Particularly this year, with US government deficits soaring, everyone from the Teabaggers to Glenn Beck and Senate Republicans are reviving a scary Friday the 13th scenario from the 1990s about a return to Big Government. Recently Rudy Giuliani even stated that President Obama was moving us towards — gasp — European socialism. Europe frequently plays the punching bag role during these moments because there is a perception that the poor Europeans are overtaxed serfs. But a closer look reveals that this is a myth that prevents Americans from understanding the vast shortcomings of our own system. A few years ago, an American acquaintance of mine who lives in Sweden told me that, quite by chance, he and his Swedish wife were in New York City and ended up sharing a limousine to the theater district with a southern U.S. Senator and his wife. This senator, a conservative, anti-tax Democrat, asked my acquaintance about Sweden and swaggeringly commented about “all those taxes the Swedes pay.” To which this American replied, “The problem with Americans and their taxes is that we get nothing for them.” He then went on to tell the senator about the comprehensive level of services and benefits that Swedes receive. “If Americans knew what Swedes receive for their taxes, we would probably riot,” he told the senator. The rest of the ride to the theater district was unsurprisingly quiet. The fact is, in return for their taxes, Europeans are receiving a generous support system for families and individuals for which Americans must pay exorbitantly, out-of-pocket, if we are to receive it at all. That includes quality health care for every single person, the average cost of which is about half of what Americans pay, even as various studies show that Europeans achieve better health results. But that’s not all. In return for their taxes, Europeans also are receiving affordable child care, a decent retirement pension, free or inexpensive university education, job retraining, paid sick leave, paid parental leave, ample vacations, affordable housing, senior care, efficient mass transportation and more. In order to receive the same level of benefits as Europeans, most Americans fork out a ton of money in out-of-pocket payments, in addition to our taxes. For example, while 47 million Americans don’t have any health insurance at all, many who do are paying escalating premiums and deductibles. Indeed, Anthem Blue Cross announced that its premiums will increase by up to 40%. But Europeans receive health care in return for a modest amount deducted from their paychecks. Friends have told me they are saving nearly a hundred thousand dollars for their children’s college education, and most young Americans graduate with tens of thousands of dollars of debt. But European children attend for free or nearly so (depending on the country). Child care in the U.S. costs over $12,000 annually for a family with two children, but in Europe it cost about one-sixth that amount, and the quality is far superior. Millions of Americans are stuffing as much as possible into their IRAs and 401(k)s because Social Security provides only about half the retirement income needed. But the more generous European retirement system provides about 75-85 percent (depending on the country) of retirement income. Either way, you pay. Americans’ private spending on old-age care is nearly three times higher per capita than in Europe because Americans must self-finance a significant share of their own senior care. Sixty million American workers have no paid sick leave, millions more have no paid parental leave following a birth, and so must self-finance their own time off. But Europeans receive all this in exchange for their taxes. Income taxes in Europe are certainly high for some people, but the highest rates are paid only by those in the highest income brackets. Many middle class and low income Europeans don’t necessarily pay an income tax rate any higher than what many Americans pay. And Americans also tend to pay more in local and state taxes, as well as in property taxes. Americans also pay hidden taxes, such as $300 billion annually in federal tax breaks to businesses that provide health benefits to their employees. When you sum up the total balance sheet, it turns out that Americans pay out just as much as Europeans — but we receive a lot less for our money. Unfortunately these sorts of complexities are not calculated into simplistic analyses like Forbes’ annual Tax Misery Index, a “study” which shows European nations as the most tax miserable and the low-tax United States as happy as a clam — right down there on the list next to Indonesia, Malaysia and the Philippines. But Forbes only adds up income tax, social security, sales tax or VAT and a few other minor fees. A thorough analysis would need to create a ledger in which all the supports and services Europeans receive are listed on one side and the amount of taxes and any out-of-pocket expenses they pay are listed on the other; and then do a similar analysis for Americans, listing what Americans pay in taxes as well as out-of-pocket expenses for those same services. That kind of analysis is much more illuminating. In this economically competitive age, increasingly these kinds of supports and services are necessary to ensure healthy, happy and productive families and workers. Europeans have them but most Americans do not, unless you pay a ton out of pocket. Or unless you are a member of Congress, who of course provide European-level support for themselves and their families. That’s something to keep in mind on April 15. Happy Tax Day. Steven Hill is the author of the recently published Europe’s Promise: Why the European Way is the Best Hope in an Insecure Age and director of the Political Reform Program for the New America Foundation.

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Boudou Sees Argentina Paying 2 Points Over Brazil by 2011 After Debt Swap

April 15, 2010

By Drew Benson, Bill Faries and Eliana Raszewski April 16 (Bloomberg) — Argentina’s $20 billion debt swap will reduce the country’s borrowing costs by a third to about two percentage points above that of neighboring Brazil within a year, opening the door for investment needed to bolster economic growth, Economy Minister Amado Boudou said. “We are convinced that we have to mark a lower interest rate than we have now and that is the most important goal that we seek with this swap,” Boudou said in an April 14 interview, citing potential investments in energy and agriculture. Boudou unveiled an offer yesterday to swap defaulted bonds left out of a 2005 restructuring for securities due in 2033 worth 33.7 cents on the dollar and pay past due interest with bonds due in 2017. The proposal, which excludes past payments on warrants linked to economic growth, will help Argentina regain credibility among investors nine years after the government defaulted on $95 billion of debt, Boudou said. Argentine dollar bonds yield 5.92 percentage points more than U.S. Treasuries, compared with a spread of 1.67 percentage points for Brazilian debt, according to JPMorgan Chase & Co. The 4.25-percentage point gap between the countries, the smallest since September 2008, has shrunk from 15.24 percentage points on March 2009. Only Venezuela and Ecuador pay more than Argentina to borrow in dollars among all developing economies. By comparison, investors demanded 3.79 percentage points more than U.S. treasuries to own Iraqi bonds. Highest Yielding Bonds “Their borrowing costs will be lower, but they’re still going to be one of the highest yielding bonds in the market,” said Jim Craige , who helps manage $12 billion at Stone Harbor Investment Partners in New York and holds some of the defaulted bonds. “Should Argentina issue at debt spreads twice that of Iraq? Yeah I guess so. Because investors don’t have a high confidence that their willingness to service debt is real.” Craige said without the payments for the warrants the current deal is worth about 50 cents on the dollar. The total value, through December, for investors who participated in the 2005 offer was 57 cents, according to Exotix Ltd., a brokerage that specializes in distressed securities. Argentine President Cristina Fernandez de Kirchner said the swap is a “second opportunity” for investors who didn’t take part in the 2005 restructuring. “I hope that those who didn’t believe us in the 2005 exchange realize that they made a mistake,” Fernandez, 57, said in an interview last night in her office in Buenos Aires. “Come, and it will go very well.” The extra yield that Argentina pays on its dollar bonds relative to Brazil’s will fall to “maybe 200 basis points” a year from now, Boudou, 47, said. “That’s a good goal to seek.” A basis point is 0.01 percentage point. ‘Unrealistic’ Former central bank President Alfonso Prat-Gay , now an opposition leader in the Congress, said such a decline in borrowing costs for Argentina is “unrealistic” because there’s a lack of confidence in the government for underreporting inflation rates. Consumer prices have risen at an annual pace of about 24 percent the past three months, Prat-Gay said, more than double the 9.7 percent reported by the government-run statistics institute, Indec, for the 12 months ended in March. ‘Lack of Credibility’ “It’s because of a lack of credibility that you don’t get Brazil’s type of rates but rather Venezuelan type of rates,” Prat-Gay said in an interview at his office yesterday. After the swap is completed, Argentina will seek to restructure almost $7 billion in defaulted debt with the Paris Club group of creditor nations and exchange bonds due in 2012, known as Bodens, Boudou said. Settling with the Paris Club will give companies access to government credit to finance investments in Argentina, he said. “That’s the next step in the roadmap,” said Boudou, whose Buenos Aires office is adorned with portraits of former President Juan Domingo Peron and his wife, Evita. South America’s second-largest economy may expand more than 5 percent this year, Boudou said earlier this month, after 0.9 percent growth in 2009. Brazil’s economy will grow 5.8 percent this year, according to the country’s central bank. Argentina grew more than 8.5 percent a year from 2003 to 2008, according to Indec. First Restructuring Argentine bonds yielded a record 63.26 percentage points more than Brazilian bonds on June 8, 2005. That difference began shrinking after Argentina completed its first debt restructuring that month and was erased in 2007, with Argentine bonds yielding five basis points less than Brazil on Jan. 30 that year. The yield gap between the countries began to swell after then-President Nestor Kirchner began changing personnel at Indec, sparking concern that the government was underreporting inflation. Argentines expect prices to rise 30 percent over the next year, the fastest pace in Latin America after Venezuela, according to an April 5 to April 12 survey published by Buenos Aires-based Torcuato Di Tella University. Boudou said Indec measures a basket of goods bought by lower income households. The Di Tella survey reflects the views of a private university and the concerns of middle or upper class Argentines, Boudou said. The government is working to change how inflation is measured, he said. “It’s understandable that other sectors of the population, especially the middle and upper class, have a perception that prices” are high, Boudou said. Complaints about inflation are also coming from investors holding inflation-linked debt who are trying to generate a bigger payout than they deserve, he said. Brazil’s annual inflation rate will climb to 5.29 percent by year-end, above the government’s 4.5 percent target, according to an April 9 survey by the central bank. “Argentina will drop with relation to Brazil, but it won’t trade on top of Brazil,” said Kathryn Rooney , an emerging markets analyst at Bulltick Capital in Miami, in a telephone interview. “Argentina is a great bet but let’s face it — they’re still fudging the inflation figures.” To contact the reporters on this story: Drew Benson in Buenos Aires at abenson9@bloomberg.net ; Bill Faries in Buenos Aires at wfaries@bloomberg.net ; Eliana Raszewski in Buenos Aires at eraszewski@bloomberg.net .

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Polish President Kaczynski Came to Power in 2005 Vowing `Moral Revolution’

April 10, 2010

By Nathaniel Espino and Marta Waldoch April 10 (Bloomberg) — Polish President Lech Kaczynski , a former anti-communist dissident who came to power with his twin brother in 2005 promising a “moral revolution,” died in a plane crash in Russia. He was 60. Kaczynski was killed during a landing near Smolensk, Russia, where he was to pay tribute to more than 4,000 Polish military officers massacred by Soviet secret police in the Katyn forest. His wife, Maria, and central bank Governor Slawomir Skrzypek also lost their lives. “Five years ago I experienced the death of the Holy Father,” Roman Catholic Cardinal Stanislaw Dziwisz said at a news briefing carried live on Polish public television, referring to the late Pope John Paul II . “Now we have a similar tragedy. This is a great tragedy for the Polish nation.” Kaczynski was elected in October 2005, the month after the Law & Justice party he co-founded with his brother Jaroslaw won a parliamentary election. Jaroslaw later became the prime minister, giving the identical twins control of both the presidency and the government. The brothers pledged to stamp out corruption and break up “the system,” which they saw as rife with communist-era officials who controlled politics and business in the country of 38 million people. Their goal suffered a setback in 2007 when voters kicked Jaroslaw out in early elections after his governing coalition fell apart. Poles then voted in current Prime Minister Donald Tusk , who had lost the presidency to Lech Kaczynski in 2005. Policy Disputes After Tusk took office, he and Kaczynski clashed over the president’s role in foreign policy, on issues including the U.S. missile defense program and the appointment of a NATO secretary general. In 2008, Kaczynski chartered his own plane to attend a European Union summit in Brussels after Tusk’s government said his presence at the summit would make Poland’s work “too difficult” and refused to allow him a government aircraft. He was endorsed by Law and Justice for a presidential election due later this year, for which he was trailing in opinion polls. He was expected to announce his bid for reelection next month. Lech Kaczynski was born on June 18, 1949. His father, Rajmund, served in Poland’s Home Army resistance during World War II, fighting in the Warsaw Uprising of 1944. Child Actors Lech and Jaroslaw became child stars in 1962 when they appeared in “The Two Who Stole the Moon,” a film about troublemaker twins who decide to steal the moon and sell it so they wouldn’t ever have to do any work. Lech Kaczynski became involved in Poland’s anti-communist opposition in 1976, according to a biography on the presidential Web site . He was jailed in the 1980s for his work with the anti- communist Solidarity trade union founded by Lech Walesa . Walesa was elected Poland’s first post-communist president in 1990 and the Kaczynski brothers broke with him in 1991, feuding publicly with the Nobel laureate. Kaczynski returned to politics in 2000-2001, serving as minister of justice, and was elected mayor of Warsaw in 2002- 2005, where for two consecutive years he refused to let gay- rights activists hold an “Equality Parade.” Kaczynski earned a doctorate in law at the University of Gdansk in 1980, writing a dissertation on labor law. Kaczynski and his wife are survived by a daughter, Marta, and her two daughters, Ewa and Martyna. To contact the reporters on this story: Nathaniel Espino in Warsaw nespino@bloomberg.net Marta Waldoch at mwaldoch@bloomberg.net

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States Target Payday Lenders

April 8, 2010

PHOENIX — When Jeffrey Smith needed some quick cash to pay a medical bill, he turned to a payday loan store near his home outside Phoenix. He eventually took out a string of payday loans and fell into a vicious cycle in which he would call out sick from work so he could drive all over town to pay off loans and take out new ones. The experience left him in bankruptcy, lying to his wife and fighting thoughts of suicide. Stories like Smith’s and a growing backlash against payday lending practices have prompted legislatures around the country to crack down on the businesses. In the most severe case, Arizona lawmakers are on the verge of shutting down the entire industry in the state. A law took effect in Washington this year capping the amount of payday loans and the number that a borrower can take out in a year. And in Wisconsin, lawmakers are locked in a heated battle over whether to regulate the industry. Payday lenders say they are providing an important service, especially in a dreadful economy where people are short on cash. Detractors say the industry preys on desperate people with annual interest rates that routinely exceed 400 percent. “It’s sort of like a twisted person that’s standing on the street corner offering a child candy,” Smith said. “He’s not grabbing the child and throwing him into a van, but he’s offering something the child needs at that moment.” Payday loans are short-term, high-interest loans that are effectively advances on a borrower’s next paycheck. For example, a person who needs a quick $300 but doesn’t get paid for two weeks can get a loan to help pay the bills, writing a postdated check that the store agrees not to cash until payday. The borrower would have to pay $53 in finance charges for a $300, two-week loan in Arizona – an annual interest rate of 459 percent. Payday loan stores are ubiquitous in Arizona, especially in working-class neighborhoods of Phoenix where the businesses draw in customers with neon lights and around-the-clock hours. Payday lenders in Arizona several years ago were granted a temporary exemption from the state’s 36 percent cap on annual interest rates. The exemption expires June 30, and the industry says the interest cap is so restrictive that it will have to shut down entirely. Bills that would have kept the industry alive languished in the House and Senate, and the year’s third and final attempt was pulled Tuesday amid a lack of support. Consumers frustrated with the economy “look for a dog to kick” because they’re angry with the financial institutions they blame for the Great Recession, said Ted Saunders, chief executive of Dublin, Ohio-based Checksmart, a payday lender that operates in 11 states including Arizona. “They want to find a villain,” Saunders said. And opponents “have done a good job of painting a big X on my back.” Payday lending opponents say the industry depends on trapping some borrowers in a cycle of debt where they continually renew their loan or take out new ones because they can’t afford to pay the debt while still covering their daily expenses. Eventually, the fees can surpass the value of the initial loan so the lender profits even if the borrower defaults. Industry proponents say the market has shown a need for short-term, small-dollar loans that aren’t generally available from banks or credit unions, especially with traditional lenders being more conservative in the down economy. They say the industry supports working families that otherwise wouldn’t have access to credit in an emergency. Supporters also say taking a payday loan is cheaper than paying a late fee or bouncing a check to cover emergency costs like fixing a car or keeping the electricity turned on. The voting public doesn’t seem to be buying the argument. In 2008, voters in Arizona and Ohio soundly rejected industry-backed measures that would have allowed payday lenders to continue charging high annual interest rates. A group in Montana is collecting signatures for an initiative asking voters to decide whether to cap interest rates at a level that would doom the industry. “It’s just a fairness issue,” said state Sen. Debbie McCune Davis, a Phoenix Democrat who led the fight at the Legislature against payday loans. “I think when people work for a living they’re entitled to have financial instruments that are ethical in the way that they operate.” Industry backers say the election results aren’t a good guide because many voters have no experience with payday loan services. “Our customers, they don’t have much of a voice in these fights,” said Steven Schlein, a spokesman for the industry lobbying group Consumer Financial Services Association of America. Arizona wouldn’t be the first state to kick out payday lenders. North Carolina let lapse a temporary law authorizing payday loans, and the District of Columbia repealed its law allowing them. Ohio tried to cap interest rates at 28 percent, but some payday lenders have survived by using a state law allowing them to charge loan origination fees. The payday loan industry has succeeded in fighting back attempts in Congress to crack down on their business thanks to an expensive lobbying effort. When Arizona’s law expires, executives have said they’ll try to keep open some of their 650 stores in the state by stepping up their other lines of business, including car title loans, check cashing and prepaid debit cards. “The payday statutes will evaporate out of the books, (but) the demand doesn’t go away,” industry lobbyist Lee Miller said. “Capitalism abhors a vacuum. Entrepreneurs will come forward and try to find a profitable way to meet that demand.” ___ Associated Press Writer Paul Davenport in Phoenix contributed.

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Sudan Election Process Called `Disturbing’; Carter Regrets Party Boycotts

April 8, 2010

By Bill Varner and Maram Mazen April 8 (Bloomberg) — The U.S. said preparations for Sudan’s first multiparty elections in 24 years have been marred by a lack of political freedom as former President Jimmy Carter expressed “regret” that some opposition parties pulled out. “The trends on the ground are very disturbing,” U.S. Ambassador to the United Nations Susan Rice told reporters in New York following a briefing to the Security Council by the head of peacekeeping operations. “Much is awry in this process. Concerns are mounting.” Rice said the campaign has been characterized by restrictions on freedom of speech and assembly, harassment of the media and limitations on access to polling stations in the western Darfur region. She said the decision of European Union observers to leave Darfur showed how “insecure and problematic” the electoral process has been there. “I regret that some of the parties decided not to participate,” Carter, 85, told reporters upon his arrival today in Khartoum, Sudan’s capital. “We are hoping and praying it will be a fair and honest election, at least for the ones who are participating.” The Atlanta-based Carter Center , which the former president set up with his wife, Rosalynn, has been monitoring the electoral process in Sudan. Voting set for April 11-13 won’t be delayed, Sudan’s ambassador to the UN, Abdalmahmood Abdalhaleem, said, predicting elections that will be “fair, transparent and successful.” He said there was no “crisis” in his nation. Umma Boycott Rice asked for the report to the Security Council following the announcement by former Sudanese Prime Minister Sadig al Mahdi’s Umma party that it will boycott the election. The Umma party had issued eight demands that included an election delay, a freeze on “oppressive security laws” and putting state media under a neutral authority before it would agree to participate in the vote. Those conditions weren’t met, Sarah Nugdallah, the head of Umma’s political bureau, said late yesterday in Khartoum. Southern Sudan’s ruling party said yesterday it will also boycott the elections across most of the northern part of the country. The party, the Sudan People’s Liberation Movement, last month said it was withdrawing its presidential candidate and boycotting polls in Darfur, where as many as 300,000 people have died in a seven-year conflict, mainly of disease and starvation. The boycotts are a blow to efforts by President Umar al- Bashir , who has been indicted by the International Criminal Court for war crimes in Darfur, to portray Sudan as moving toward democratic rule. The elections for the presidency, parliament and state governorships are being held five years after a peace agreement ended a two-decade war between north and south Sudan that killed as many as 2 million people. Sudan is sub-Saharan Africa’s third-largest oil producer, pumping about 480,000 barrels a day, according to the BP Statistical Review of World Energy. Most of the oil fields are in the south. To contact the reporters on this story: Bill Varner at the United Nations at wvarner@bloomberg.net ; Maram Mazen in Khartoum via Cairo at mmazen@bloomberg.net ;

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