Financial News

Pelosi says new tax is "on the table"

2009-10-06T16:41:00.002-04:00

A new value-added tax (VAT) is "on the table" to help the U.S. address its fiscal liabilities, House Speaker Nancy Pelosi (D-Calif.) said Monday night.

Pelosi, appearing on PBS's "The Charlie Rose Show" asserted that "it's fair to look at" the VAT as part of an overhaul of the nation's tax code.

"I would say, Put everything on the table and subject it to the scrutiny that it deserves," Pelosi told Rose when asked if the VAT has any appeal to her.

The VAT is a tax on manufacturers at each stage of production on the amount of value an additional producer adds to a product.

Pelosi argued that the VAT would level the playing field between U.S. and foreign manufacturers, the latter of which do not have pension and healthcare costs included in the price of their goods because their governments provide those services, financed by similar taxes.

"They get a tax off of that and they use that money to pay the healthcare for their own workers," Pelosi said, using the example of auto manufacturers. "So their cars coming into our country don't have a healthcare component cost.

"Somewhere along the way, a value-added tax plays into this. Of course, we want to take down the healthcare cost, that's one part of it," the Speaker added. "But in the scheme of things, I think it's fair look at a value- added tax as well."

Pelosi said that any new taxes would come after the Congress finishes the healthcare debate consuming most lawmakers' time, and that it may come as part of a larger overhaul to the tax code.

The Speaker also emphasized that any reworking of the tax code would not result in an increase in taxes on middle-class Americans.

WWE SummerSlam 2009 Live Stream

2009-08-22T08:46:00.003-04:00

On August 23, 2009, you can watch WWE SummerSlam 2009 live stream.

Watch all the action live and in HD and don't worry about the stream going out or freezing.

SummerSlam 2009 start time: 8pm EST

SummerSlam 2009 fight card:

Randy Orton vs John Cena

Chris Jericho and The Big Show vs Cryme Tyme (Shad Gaspard and JTG)

Rey Mysterio vs Dolph Ziggler

Jeff Hardy vs CM Punk

D-Generation X vs Cody Rhodes & Ted DiBiase

Kane vs The Great Khali

Jack Swagger vs MVP

Make sure you don't miss the mega sporting event that's taking place on Sunday, August 23, 2009.

WWE SummerSlam 2009 live stream will start 30 mintues before the event begins.

US Tax dodgers scrambling to come clean

2009-08-16T10:27:00.005-04:00

A deal with Switzerland settling U.S. demands for the names of suspected tax dodgers from a Swiss bank has a lot of wealthy Americans with offshore accounts nervously running to their tax advisers — and the Internal Revenue Service.

"They are very frightened," said Richard Boggs, chief executive of Nationwide Tax Relief, a Los-Angeles-based tax firm that specializes in clients with tax debts exceeding $100,000. "You have the super rich who are not used to being pushed around and they are finding themselves in unfamiliar territory."

The U.S. and Swiss governments announced a court settlement last week in efforts by the IRS to force Zurich-based UBS AG to turn over the names of some 52,000 Americans believed to be hiding nearly $15 billion in assets in secret accounts.

Justice Department and UBS lawyers told a federal judge in Miami in a brief conference call Wednesday they had initialed a final deal. But they did not disclose any details, such as how many of the 52,000 names sought by the IRS will be revealed.

Even before the settlement, the high-profile case — coupled with other U.S. efforts to go after Americans hiding undeclared assets — has scared hundreds of tax dodgers to turn themselves in. Boggs said his firm has been taking on 100 new cases a month, a big increase over previous years.

Peter Zeidenberg, a litigation partner at the law firm DLA Piper in Washington, said he, too, is he seeing more people with undeclared assets seeking information about their legal options.

His advice: "I don't think you have much of a choice but to come forward. ... I think the landscape is permanently changed."

The IRS long has had a policy that certain tax evaders who come forward before they are contacted by the agency usually can avoid jail time as long as they agree to pay back taxes, interest and hefty penalties. Drug dealers and money launderers need not apply. But if the money was earned legally, tax evaders can usually avoid criminal prosecution.

In March, the IRS began a six-month amnesty program that sweetened the offer with reduced penalties for people with undeclared assets. IRS Commissioner Doug Shulman said the response has been unprecedented.

Shulman wouldn't say how many people have applied so far. But the IRS said 400 people applied to voluntarily disclose undeclared assets in a single week in July, compared with fewer than 100 applications all last year.

The amnesty program, which ends Sept. 23, is part of a larger effort by federal authorities to crack down on international tax evaders.

"Each time someone walks through the door with a disclosure, we get more information. We get more information about other people. We get more information about other financial institutions," Shulman said. "If people have been hiding assets in the past, they should be nervous, and they should be a lot more suspect about doing it in the future."

The U.S. recently reached agreements with several countries, including Luxembourg and Switzerland, to share more tax information in the future, just as the IRS is strengthening its enforcement ranks.

President Barack Obama, in his proposed 2010 budget, asked Congress to pay for 800 additional agents, examiners and lawyers to go after people who hide money overseas. Obama also wants Congress to require overseas financial institutions doing business in the U.S. to share more information with the IRS.

Earlier this year, UBS admitted assisting U.S. citizens in evading taxes as part of a deferred prosecution agreement with the Justice Department. UBS agreed to disclose the names of about 300 American clients and pay a $780 million penalty. The IRS subsequently filed its case seeking the names of 52,000 additional U.S. taxpayers believed to be hiding assets in UBS accounts.

So far, four UBS customers whose names were given to U.S. authorities under the prior agreement have made deals to plead guilty to tax charges in federal court.

"The UBS case, the agreements we are signing, the legislative proposals and the enforcement efforts are all meant to send one message, which is that if you owe tax to the U.S., we are going to use every tool we have available to get that," said Michael Mundaca, acting assistant treasury secretary.

Sen. Carl Levin, D-Mich., applauded the administration's efforts, but said more can be done to catch tax evaders. Levin has introduced a bill that would direct the treasury secretary to maintain a list of nations that "impede U.S. tax enforcement" and give him authority to impose financial penalties against uncooperative countries.

Levin's initial list of 34 countries and other jurisdictions would include Switzerland, the Cayman Islands, Bermuda, the Bahamas, Hong Kong and Panama.

"We should have put a clampdown on these tax havens a long time ago," he said in an interview.

Raymond Baker of Global Financial Integrity, a Washington-based group that advocates tougher policies against international money laundering, said he is encouraged by the administration's efforts. But he's not ready to call it a crackdown.

"As we get past the UBS case, is the momentum for continuing to go after tax evaders going to be sustained?" Baker said. "I think it's too early to tell."

It would, however, be risky for a wealthy tax dodger to wait to see if the government's stepped up efforts continue, said Boggs, the tax adviser. He said his firm usually recommends a "strategic surrender" to the IRS.

"We basically are waving a white flag and telling the IRS that we have every intention of resolving this issue in the mutual best interest of the government and our client," Boggs said.

"Historically, the best outcomes that we have been able to negotiate have always involved good faith from the taxpayer," he said. "And good faith means getting to the IRS before they get to you."

Colonial BancGroup shut down

2009-08-15T08:44:00.003-04:00

Real estate lender Colonial BancGroup Inc. has been shut down by federal officials in the biggest U.S. bank failure this year.

The Federal Deposit Insurance Corp., which was appointed receiver of the Montgomery, Ala.-based Colonial and its about $25 billion in assets, said the failed bank's 346 branches in Alabama, Florida, Georgia, Nevada and Texas will reopen at the normal times starting on Saturday as offices of Winston-Salem, N.C.-based BB&T.

The FDIC has approved the sale of Colonial's $20 billion in deposits and about $22 billion of its assets to BB&T Corp.

Regulators also closed four other banks: Community Bank of Arizona, based in Phoenix; Union Bank, based in Gilbert, Ariz.; Community Bank of Nevada, based in Las Vegas; and Dwelling House Savings and Loan Association, located in Pittsburgh.

The closures boosted to 77 the number of federally insured banks that have failed in 2009.

The agency established a temporary government bank for Community Bank of Nevada to give depositors about 30 days to open accounts at other financial institutions. The failed bank had assets of $1.52 billion and deposits of $1.38 billion as of June 30.

Community Bank of Arizona had assets of $158.5 million and deposits of $143.8 million as of June 30, while Union Bank had assets of $124 million and deposits of $112 million as of June 12. The FDIC said that MidFirst Bank, based in Oklahoma City, has agreed to assume all the deposits and $125.5 million of the assets of Community Bank of Arizona, as well as about $24 million of the deposits and $11 million of the assets of Union Bank. The FDIC will retain the rest for eventual sale.

Dwelling House had $13.4 million in assets and $13.8 million in deposits as of March 31. PNC Bank, part of Pittsburgh-based PNC Financial Services Group Inc., has agreed to assume all of Dwelling House's deposits and about $3 million of its assets; the FDIC will retain the rest for eventual sale.

The failure of Colonial is expected to cost the deposit insurance fund an estimated $2.8 billion and that of Community Bank of Nevada, $781.5 million; Union Bank, $61 million; Community Bank of Arizona, $25.5 million; and Dwelling House, $6.8 million.

The 77 bank failures nationwide this year compare with 25 last year and three in 2007.

As the economy has soured -- with unemployment rising, home prices tumbling and loan defaults soaring -- bank failures have cascaded and sapped billions out of the deposit insurance fund. It now stands at its lowest level since 1993, $13 billion as of the first quarter.

While losses on home mortgages may be leveling off, delinquencies on commercial real estate loans remain a hot spot of potential trouble, FDIC officials say. If the recession deepens, defaults on the high-risk loans could spike. Many regional banks hold large numbers of them.

The number of banks on the FDIC's list of problem institutions leaped to 305 in the first quarter -- the highest number since 1994 during the savings and loan crisis -- from 252 in the fourth quarter. The FDIC expects U.S. bank failures to cost the insurance fund around $70 billion through 2013.

The May closing of struggling Florida thrift BankUnited FSB is expected to cost the insurance fund $4.9 billion, the second-largest hit since the financial crisis began. The costliest was the July 2008 seizure of big California lender IndyMac Bank, on which the insurance fund is estimated to have lost $10.7 billion.

The largest U.S. bank failure ever also came last year: Seattle-based thrift Washington Mutual Inc. fell in September, with about $307 billion in assets. It was acquired by JPMorgan Chase & Co. for $1.9 billion in a deal brokered by the FDIC.

Watch UFC 101 Live Stream

2009-08-08T21:29:00.004-04:00

Watch UFC 101 live stream:

It's going down on Aug. 8 at 10pm EST.

Who's going to win the title match: BJ Penn vs Kenny Florian or Anderson Silva vs Forrest Griffin

I got my money on BJ Penn, let's hope he doesn't let me down.

UFC 101 live stream will start at 10pm EST so don't be late or you will miss out big time!

So many people are talking about UFC 101 live stream and all the hype is truly living up to expectations.

BJ Penn has a lot of supporters behind hime. (I am one of them) But you can't count Kenny Florian out either.

UFC 101 live stream:

Cash For Clunkers Program 2009

2009-07-28T16:07:00.004-04:00

The United States Government has recently released the “Cash For Clunkers” program, 2009. There has been some confusion as to how to go about claiming the $4,500 check.

The Cash For Clunkers Program 2009 might be a benefit to some and a headache to others. You will have decide for yourself if it's for you.

So many people don't really understand the Cash For Clunkers Program 2009. Here, I'll provide more details for you.

First off, there is no $4,500 check, at least not one the public will ever see. The entire transaction must be done at the dealership, and if the transaction qualifies, the dealership will receive the sum direct from the government.

This is something a lot of people should be informed about before going out and purchasing an automobile.

To take advantage of the offer, the individual making the purchase must fulfill two requirements:

1) Must have a trade-in that has been registered and in use for at least a year, and has a federal combined city/highway fuel economy rating of 18 or fewer miles per gallon.

2) Must buy a new car priced no higher than $45,000 and must have a MPG rating of at least: 4 MPG higher than the trade-in to get $3,500 or 10 MPG higher than the trade-in to get $4,500.

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US Open Tickets Available

2009-06-08T11:23:00.003-04:00

Grab your US Open tickets right now.

The 2015 U.S. Open may be a long ways away, but golf fans in the area hoping to see the world's best golfers at Chambers Bay in Tacoma can secure their tickets this month.

This year’s US Open is expected to remain the world’s highest attended annual sporting event as more than 250 of the world’s top tennis players from over 60 countries compete in this two-week event.

The USGA announced Thursday that, for the first time, a combination ticket package for the 2010 U.S. Senior Open and the 2015 Open will be available for purchase. Fans who purchase Trophy Club packages ($250 for the week) or season passes ($150) by June 30 for next summer's U.S. Senior Open at Sahalee Country Club will be guaranteed the right to purchase 2015 U.S. Open tickets as well.

That purchase will also come with a 12-month USGA membership. Current USGA members will receive a special gift from the USGA. Ticket packages for the Senior Open include parking and a commemorative program.

By purchasing Senior Open tickets by June 30, fans are assured a chance to buy U.S. Open tickets and avoid the usual ticket lottery. This year's U.S. Open at Bethpage Black in New York marks the 23rd straight Open to sell out of tickets.

The 2009 US Open will be held from Monday, August 31 through Sunday, September 13 at the USTA Billie Jean King National Tennis Center in Flushing, N.Y. Arthur Ashe Kids’ Day presented by Hess, a full-day tennis and music festival for children and families, will kick off the US Open for the 14th consecutive year and will take place on Saturday, August 29. Tickets for the 2009 US Open and Arthur Ashe Kids’ Day can be purchased.

The 2009 US Open will feature day sessions beginning at 11 a.m. and night sessions beginning at 7 p.m. from Monday, Aug. 31 through the quarterfinals on Thursday, Sept. 10. Finals Weekend will feature the Women’s Singles Semifinals on Friday, Sept. 11; the Men’s Singles Semifinals on Saturday, Sept. 12; the Women’s Singles Final in primetime at 8 p.m. on Saturday, Sept. 12; and the Men’s Singles Final at 4 p.m. on Sunday, Sept. 13.

Memorial Day deals at Bestbuy.com

2009-05-23T12:09:00.014-04:00

Memorial Day Specials - 2 Days Only!

Are you looking to get a good deal on merchandise this Memorial Day?

I hope so, cause Best Buy is having a terrific sales event that you wouldn't want to miss.

BestBuy.com is excited to announce a new 2-Day Sale event this Sunday - Monday (5/24-5/25). This Memorial Day Sale is filled with great limited-time deals on MP3 Players, Blu-ray Disc Players, Appliances and much more!

Visit Bestbuy.com to see this week's sale events and free shipping offers.

GM dealerships closing

2009-05-15T09:06:00.002-04:00

GM said it will notify 1,100 U.S. dealers on Friday that their franchise agreements will not be renewed. Dealers expect to hear either by telephone or FedEx letters that will begin arriving Friday morning.

The cuts will come just a day after crosstown rival Chrysler announced it was dropping 789 of its roughly 3,200 dealerships by around June 9. Both companies have too many dealerships for too few sales are slashing costs as they race to restructure.

The GM dealer cuts are likely to have a much greater impact than Chrysler's. While many Chrysler dealers also sell other brands and will stay open after losing their franchises, a large number of GM dealers sell only GM vehicles. So if their franchises are revoked, they run a greater risk of closing for good.

In both cases, the cuts will cost thousands of jobs, create holes in local tax bases, eliminate community pillars and create economic ripple effects across the country.

Chrysler has received $4 billion in government aid, while GM has received $15.4 billion. GM is continuing to restructure out of court and faces a government-imposed deadline of May 31 for doing so. Several difficult hurdles remain, and many experts say that it is all but inevitable that it will follow Chrysler into Chapter 11 bankruptcy.

To remake itself outside of court, GM must persuade its bondholders to swap $27 billion in debt for 10 percent of its risky stock. In addition, it must work out deals with its union, announce factory closures, cut or sell brands and shutter dealers.

Frontier to buy rural Verizon lines for $5.3B

2009-05-13T10:05:00.003-04:00

Frontier will acquire Verizon's wireline business in 14 states, increasing the number of access lines in its portfolio to 7 million.

Frontier expects to save about $500 million in costs annually from the deal, by leveraging its existing networks and infrastructure.

The deal continues Verizon's strategy of focusing on its core areas, where it is upgrading its phone lines to fiber optics, enabling it offer TV service and faster Internet access. It sold off its phone lines in Maine, New Hampshire and Vermont for $2.3 billion last year to Fairpoint Communications Inc.

The agreement would give Frontier 4.8 million phone lines to residential and small business customers and 1 million broadband connections. Frontier currently has 2.3 million customers.

Verizon shareholders will own between 66 percent and 71 percent of the new company after the deal closes, while Frontier shareholders will own between 29 percent and 34 percent. The deal is expected to close within 12 months.

Analyst Christopher King at Stifel Nicolaus noted that buyers of Verizon phone lines have fared badly in the past — Fairpoint is struggling with its debt load, and the buyer of Verizon's Hawaiian business is in bankruptcy. But Frontier will actually reduce its debt load relative to its earnings through the transaction, King said.

Citigroup Inc and Evercore Partners acted as financial advisers to Frontier. Barclays Cap and JPMorgan Securities advised Verizon.

Bank of America may need $34B in new capital

2009-05-06T11:14:00.003-04:00

Bank of America has been among the hardest hit banks by the credit crisis and ongoing recession. It has received more than $45 billion in government aid already, and has come under heavy scrutiny in recent months for its acquisition of Merrill Lynch.

The New York Times and The Wall Street Journal are reporting that regulators are telling the Charlotte, N.C.-based bank it needs about $34 billion in capital based on results of government "stress tests."

The need for more capital comes as the government gets set to release the results of a stress test on Thursday that it completed on 19 banks to determine how they would fare in economic conditions worsened. The test aims to gauge how much of an additional capital cushion the nation's biggest banks need to protect against potential future losses.

The $45 billion Bank of America received from the government through the Troubled Asset Relief Program could be converted to common stock to help alleviate the cash shortfall. Currently the government holds preferred shares in Bank of America for its investment.

The bank's chief administrative officer, J. Steele Alphin, said in the New York Times report that the bank would have plenty of options to raise capital before it would need to convert taxpayer money into common stock.

Bank of America could also shed assets, such as a portion of its stake in China Construction Bank. A lockup provision expires Thursday that would allow Bank of America to sell about a third of its stake in the Chinese bank, which could fetch about $8 billion, according to the Journal report.

Last week, amid shareholder unrest about the Merrill deal, investors voted to split the roles of chairman and chief executive, stripping Ken Lewis of the chairman's position. He still remains CEO.

Swine flu fears dominate world markets

2009-04-28T06:48:00.003-04:00

World stock markets fell Tuesday as investors worried that any swine flu pandemic could derail a global economic recovery as the World Health Organization said it was now too late to contain the virus and urged countries to do what they can to mitigate the effects.

In morning trading London time, the FTSE 100 of leading British shares was down 84.75 points, or 2 percent, at 4,082.26 while Germany's DAX fell 119.11 points, or 2.5 percent, to 4,574.96. The CAC-40 in France was down 69.32 points, or 2.2 percent, at 3,033.22.

The disease, which broke out in Mexico just days ago, has spread to Europe and testing of suspected cases was underway around the world. Governments everywhere have toughened their precautions and the World Health Organization raised its alert level from three to four, which is just two steps short of it declaring a full pandemic.

Though all 150 suspected deaths and most of the 2,000 or infections have been seen in Mexico, investors around the world have decided to run for cover, abandoning riskier assets such as stocks and diving back into safe haven assets like the dollar and the yen.

"Equity markets have continued to sell off amid worries that the spread of the virus will undermine hopes of an economic recovery later this year," said Stuart Bennett, an analyst at Calyon Credit Agricole.

"Until further details are available with regard to the spread of the virus and its threat, concerns will remain at the forefront signaling that risk aversion will remain elevated," he added.

With all the uncertainty gripping the markets, Wall Street futures were pointing to a sharply lower opening. Dow futures were down 103 points, or 1.3 percent, at 7,899 while the broader Standard & Poor's 500 futures fell 13.70 points, or 1.6 percent, to 843.10.

Earlier, Asia's markets took a pummeling with Japan's Nikkei index closing down 232.57 points, or 2.7 percent, to 8,493.77 and Hong Kong's Hang Seng ended 285.31 points, or 1.9 percent, lower at 14,555.11.

For the second day running, airlines and travel-related companies felt the brunt of the selling pressure. In Europe, Air France-KLM and Deutsche Lufthansa AG fell another 3 percent while British Airways PLC slumped a further 6 percent.

And in a repeat of Monday, pharmaceutical stocks, particularly those with high-profile anti-flu vaccines -- Switzerland's Roche Holding AG and GlaxoSmithkline PLC -- benefited amid the pandemic fears.

A potential pandemic wasn't the only distraction for investors, already uneasy about the results of the U.S. government's stress tests to gauge the health of the largest 19 banks.

The reports are set for release Monday, though Bank of America Corp. and Citigroup Inc. have been told by regulators the two will likely need to raise more capital, according to a Wall Street Journal report. The report suggested that Bank of America's capital shortfall could run into billions of dollars, which, in the current environment would likely be extremely difficult to raise through the private sector.

"Banks requiring capital will either need to consider further government support or to sell non-core assets. Financial stocks are likely to underperform in this environment," said Hans Redeker, an analyst at BNP Paribas.

Germany's Deutsche Bank AG was the worst-performing stock on the DAX, down over 4 percent, while in London Barclays PLC dropped over 4 percent and HSBC Holding PLC was down more than 3 percent. In Asia, Mizuho Financial Group slipped 2.0 percent in Tokyo.

On Monday, the Dow Jones industrial average suffered its first drop in three days, falling 51.29, or 0.6 percent, to 8,025.00, while the S&P 500 closed 8.72 points, or 1 percent, to 857.51.

Elsewhere in Asia, South Korea's Kospi retreated 3 percent to 1,300.24. Shanghai's main index was down 0.2 percent, Taiwan's stock measure dropped 1.9 percent while Australia's benchmark was down 0.6 percent.

Oil prices also fell foul of the swine flu concerns as investors worried about lower demand, with the June contract on the New York Mercantile Exchange down $1.39 at $48.75 a barrel. Prices shed $1.41 overnight to settle at $50.14.

In currencies, the dollar weakened to 95.59 yen from 96.37. Meanwhile, the euro was just above $1.30, having started the week above $1.3250 before investors rushed into the relative safe haven of the dollar.

Bank of America posts profit, surprises investors

2009-04-20T08:02:00.005-04:00

Waking up this morning to find Bank of America posted a profit on their stock was great.

I've own Bank of America stock since Oct. 2007 and while I will say that purchasing it at $35.50 still have me at a loss, I hope the stock rises.

Depending on what the stock do today and in a few days, I might double on on my holding to bring my cost basis down.

Bank of America managed to avoid a loss in the first quarter, surpassing analysts' expectations and providing further evidence the banking sector might be improving.

The company says it earned $2.81 billion after paying preferred dividends, or 44 cents per share. Analysts expected profit of 4 cents per share.

However, Bank of America recorded a $13.4 billion loan-loss provision, proving that it is not immune from deteriorating credit quality and growing unemployment.

With better-than-expected profit is the latest in a string of bank earnings that have beat expectations, including JPMorgan Chase and Citigroup.

Bank of America has received $45 billion in government funds as part of the Treasury Department's $700 billion financial rescue package.

Fund manager hit with civil charge in Madoff fraud

2009-04-06T15:57:00.002-04:00

New York's attorney general filed civil fraud charges Monday against a hedge fund manager who funneled $2.4 billion to Wall Street swindler Bernard Madoff without telling clients where their money was going.

The complaint accuses J. Ezra Merkin, the former chairman of GMAC Financial Services, of concealing his links to Madoff and lying to investors about what he was doing with their money, telling most he was personally investing their cash in things like distressed debt.

Over the years, Merkin collected $470 million in fees and performance bonuses from his clients, the suit said. It said many of those customers, which included several large charities and colleges, had no idea where their money really was until December, when Madoff was arrested.

"Merkin duped individual investors, non-profits, and charities into believing he was responsibly managing their investments, when in actuality he was dumping them into history's largest Ponzi scheme," Attorney General Andrew Cuomo said in a statement.

The complaint also accused Merkin of mingling his personal funds with the accounts of his management company, Gabriel Capital Group, and using some of the company's funds for personal purchases, including $91 million worth of artwork for his apartment.

Merkin's attorney, Andrew Levander, called the lawsuit "hasty," "ill-conceived" and "without merit, and he denied that clients had been kept in the dark.

"Contrary to the attorney general's allegation, investors in the Ascot Funds were well aware that the money was being invested with Madoff," Levander said in a statement. Some of those investors had even met with Madoff personally, he said.

He said Merkin had investigated and analyzed Madoff and his trading strategy before investing.

"Unfortunately," he wrote, "Mr. Merkin's due diligence, just like the detailed investigations performed by countless others, including regulators, was thwarted by the intricate, fraudulent scheme perpetrated by Madoff."

Merkin also lost millions of dollars of his own money in the scheme, although those dollar amounts pale in comparison to the losses of his clients. One of Merkin's funds, Ascot Partners, sunk nearly every penny of its more than $1.7 billion in assets into Madoff's scheme.

Cuomo's suit, filed in state court in Manhattan, demands that Merkin repay all of the fees he collected from his clients over the years, plus damages.

The lawsuit is the second major regulatory action by a state against one of Madoff's so-called "feeder funds," which supplied him with billions of dollars in investor money.

On April 1, Massachusetts Secretary of State William Galvin accused Fairfield Greenwich Group of Connecticut of civil fraud for activities related to investments with Madoff.

Galvin accused the company, which had a $7.2 billion account with Madoff, of failing to disclose concerns about Madoff's operation to investors. Fairfield Greenwich officials have, like Merkin, also professed that they were innocent victims of the scam.

Madoff pleaded guilty in March to swindling thousands of investors out of billions of dollars in what could be the largest Ponzi scheme in history.

Many of those investors came to Madoff indirectly through hedge funds like Fairfield and Ascot.

Some of those investors have also sued. And Merkin was sued Monday in New York by Mortimer Zuckerman, the real estate magnate and publisher of the New York Daily News. Zuckerman said in the suit that he and his charitable trust collectively lost $40 million in the scheme.

Get Free Cash for College

2009-04-06T02:22:00.002-04:00

It sounds like just a new twist on the all-too common Nigerian scams or Madoff-style Wall Street bait-and-switch. But it's true: Some states, businesses, and colleges are really handing out free cash to help build up parents' college savings accounts.

There are a few catches, of course. Nobody should sign up for anything that sounds suspiciously good without doing a little homework. And most of the grants and rebates are comparatively modest: The typical family might reap a few hundred dollars. Few parents will get enough free cash to make up for the average 20-plus percent decline in 529 college savings plans over the past year. (Tax-protected education savings accounts are called 529s after the part of the Internal Revenue Service code that created them.)

Still, those who collect the grants when their children are young or who are diligent about maximizing rebates could generate several extra thousand dollars.

No wonder those handing out the grants say interest is booming. More than half a million people have signed up for at least one of the rebate or grant programs since the beginning of the year. "You may as well get free money," says Joseph Hurley, founder of savingforcollege.com, who says his credit card and shopping rebates have added thousands of dollars to his family's 529.

There are six sources of free cash for college savings:

States: In at least nine states, government agencies or charities offer grants for college savings to local residents. Maine, for example, in 2009 started handing out $500 to babies born in the state for whom an adult opens a Maine 529. In states such as Arkansas, Colorado, Michigan, Minnesota, Rhode Island, and Utah, the matching grants go only to low- and middle-income families. Louisiana, New Jersey, and a few other states offer different kinds of grants or scholarship programs to encourage savers.

The catches: Each state has its own deadlines and red tape. Some require parents to fill out long forms early each year, for example. Utah's grants are so new and limited that only 19 families had qualified in the first three months of the program, which started January 1. And the Utah Educational Savings Plan, which awards the money, will stop accepting applications for the year on May 29.

Employers: In 2008, Unum started giving new parents grants of $700. The catches: Parents have to open a 529 savings account before the baby's first birthday, and the bonus is taxable.

Credit cards: Fidelity offers an American Express card that will rebate 2 percent of all purchases to a Fidelity 529. Upromise just launched a Mastercard that will send rebate checks or funnel rebates to a Upromise 529 account or to reduce Sallie Mae educational loans. The new card will rebate at least 1 percent on all purchases, 10 percent on groceries at selected stores, and--if consumers choose--additional rebates on certain gasoline or restaurant purchases. Babymint, Futuretrust, and FreshmanFund offer credit cards that rebate at least 1 percent to any 529 account. The catches: Spenders who carry balances or pay bills late will most likely pay more in interest and fees than they will save for college. Travis Plunkett, spokesman for the Consumer Federation of America, notes that credit card companies are not charities; accordingly, they are probably making more money from their borrowers than they are giving back.

Websites: Babymint, Littlegrad, Futuretrust, Upromise, and other rebate websites will send cash back to shoppers who click through their sites to partner retailers. The catches: Some of the websites make you jump through a few hoops to collect your cash.

Colleges: Several hundred colleges are offering matching grants for parents who sock away college savings. A marketing company, Sage Scholars Inc., has persuaded 230 private colleges to guarantee "Tuition Rewards" scholarships to students from families who invest or shop with Sage's business partners. And 274 private college members of the prepaid Independent 529 plan give parents at least a half-percentage-point discount if they buy tuition for a youngster at today's cost. Dickinson College upped the discount ante last year, adding an extra 4 percent to its inflation discount. That means a family with a 10-year-old who puts about $29,000 in the plan today will have paid a year's tuition in 2017, even though a year's tuition in 2009 is nearly $40,000 and, at the current rate of inflation, will probably reach $60,000 in eight years.

The catches: Plenty. Both the Independent 529 and Sage Scholars networks of colleges are limited to a few hundred comparatively expensive private colleges. There's no guarantee members' children will apply to or be admitted to the member schools. Both programs require parents to sign up several years before they tap their money. And both cover only tuition, not room, board, books, or any other college-related expenses. Sage members build up Tuition Rewards only by investing or shopping with Sage partners, some of whom charge more for their products and services than competitors not affiliated with the firm. In addition, parents of students who don't attend a member school don't get a penny of the promised scholarships back. Sage rules allow colleges to count "rewards," which average about $1,700 a year, against scholarships they were going to give the student anyway, so students may not really get any extra money. If a student doesn't end up attending a member of the Independent 529 network, parents who withdraw their money can receive no more than 2 percent more than they contributed. (But they are also limited to 2 percent less than they contributed, which makes the prepaid plan comparatively attractive right now, when the stock market is weak.)

Relatives and friends: Freshmanfund.com and Ugift offer electronic tools to make it easier to ask relatives and friends to donate to your college savings account in lieu of, say, a birthday or graduation gift. The catches: While Freshmanfund will funnel gifts to any 529, Ugift will work only with Upromise 529s. Some relatives and friends might find requests for donations to be, well, tacky. And, let's face it, you might not have many wealthy relatives. Ugift says that half of the birthday or other event donation requests result in total donations of no more than $100.

Signs recession nears bottom, but layoffs persist

2009-04-02T16:40:00.002-04:00

New signs that the recession could be nearing a bottom emerged Thursday, as factory orders were far better than expected and the Dow industrials surged over 8,000 for the first time in two months.

The Commerce Department said orders for manufactured goods rose 1.8 percent in February, reversing six straight monthly declines and easily beating estimates of another drop. Other economic indicators came in better than expected Wednesday, including construction spending and pending home sales.

Meanwhile, world leaders meeting in London on Thursday pledged $1.1 trillion to global institutions such as the International Monetary Fund to combat the downturn. And the European Central Bank agreed to cut a key interest rate to a record low of 1.25 percent.

Still, the job situation remains grim. Traditionally, the labor market doesn't pick up until well after a recovery has started.

The monthly unemployment report due out Friday likely will be dismal, and new jobless claims reported Thursday were worse than expected.

The Labor Department said initial claims for unemployment insurance rose to a seasonally adjusted 669,000 from the previous week's revised figure of 657,000. That total was above analysts' expectations and the highest in more than 26 years, though the work force has grown by about half since then.

Financial stocks led a rally on Wall Street after the board that sets U.S. accounting standards gave banks and other companies more leeway when valuing assets and reporting losses. The Dow Jones industrial average added more than 290 points, or 3.8 percent, to 8,053 in afternoon trading, the first time it has risen above 8,000 since Feb. 10. Broader indices also surged.

Bank of America Chief Executive Ken Lewis also bolstered the financial markets when he told CNBC that the recession is "getting close to the bottom."

Still, economists said the jobless claims figures indicate that companies continue to lay off workers at a rapid pace.

"Claims are typically one of the very first indicators to signal economic recovery, and there is no sign of that in the data yet," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a client note.

The tally of laid-off workers claiming benefits for more than a week rose 161,000 to 5.73 million, setting a record for the 10th straight week. That also was above analysts' expectations and indicates that unemployed workers are having difficulty finding new jobs. The continuing claims data lag the initial claims by one week.

An additional 1.5 million people received benefits under an extended unemployment compensation program Congress approved last year. That's as of March 14, the latest data available. Jobless benefits typically last 26 weeks, but the federal government is paying for an additional 20 to 33 weeks of compensation under the extended program, depending on each state's unemployment rate.

As a proportion of the work force, the number of people on the jobless benefit rolls is the highest since May 1983. The four-week moving average of jobless claims, which smooths out weekly volatility, rose to 656,750, the highest since October 1982, when the economy was emerging from a steep recession.

Employers are eliminating jobs and taking other cost-cutting measures to deal with sharp reductions in consumer and business spending. The current recession, now in its 17th month, is the longest since World War II.

Economists forecast that Friday's report will show employers cut 654,000 jobs in March, while the unemployment rate increased to 8.5 percent from 8.1 percent, according to a survey by Thomson Reuters.

Some economists raised their projection for job losses in March in response to the increase in claims. David Resler, chief economist at Nomura Securities International, said he now expects the department will report payroll cuts of 725,000 in March, up from a previous forecast of 680,000.

Companies reduced their payrolls by 651,000 jobs in February, a record third straight month of job losses above 600,000.

A private survey Wednesday said businesses cut 742,000 jobs in March. Employment at medium- and small-sized companies fell the sharpest — by a combined 614,000. The rest of the job cuts came from big firms — those with 500 or more workers_ according to the report from Automatic Data Processing Inc. and Macroeconomic Advisers LLC.

More job losses were announced this week. 3M Co., the maker of Scotch tape, Post-It Notes and other products, said Tuesday it's cutting another 1,200 jobs, or 1.5 percent of its work force, because of the global economic slump. Fewer than half the jobs will be in the U.S., but include hundreds in its home state of Minnesota. The 1,200 figure includes cuts made earlier in the first quarter.

Elsewhere, healthcare products distributor Cardinal Health Inc. said it would eliminate 1,300 positions, or about 3 percent of its work force, and semiconductor equipment maker KLA-Tencor Corp. said it will cut about 600 jobs, or 10 percent of its employees.

Among the states, California reported the biggest increase in new claims for the week ending March 21 with a jump of more than 6,700, which it attributed to layoffs in the construction and service industries. The next largest increases were in Missouri, Kansas, Oklahoma and Iowa, according to the Labor Department data.

The biggest drop was in Texas, which had 4,822 fewer claims as the trade, service, manufacturing and transportation industries cut fewer jobs. New York, Tennessee, Illinois and Virginia had the next largest declines.

The Federal Reserve has cut a key benchmark interest rate to nearly zero in an effort to jump-start lending and embarked on a series of radical programs to inject billions of dollars into the financial system.

The Obama administration's $787 billion stimulus package, approved by Congress in February, is trying to counter the recession by providing money for public works projects, extending unemployment benefits and helping states avoid budget cuts.

Madoff pleads guilty and goes to jail in handcuffs

2009-03-12T14:08:00.004-04:00

Saying he was "deeply sorry and ashamed," Bernard Madoff pleaded guilty Thursday to pulling off perhaps the biggest swindle in Wall Street history and was immediately led off to jail in handcuffs to the delight of his seething victims.

U.S. District Judge Denny Chin denied bail for Madoff, 70, and ordered him to jail, noting that he had the means to flee and an incentive to do so because of his age.

Madoff spoke softly but firmly to the judge as he pleaded guilty to 11 charges in his first public comments about his crimes since the scandal broke in early December.

"I am actually grateful for this opportunity to publicly comment about my crimes, for which I am deeply sorry and ashamed," he said.

"As the years went by, I realized my risk and this day would inevitably come. I cannot adequately express how sorry I am for my crimes."

Prosecutors say the disgraced financier, who has spent three months under house arrest in his $7 million Manhattan penthouse, could face a maximum term of 150 years in prison at sentencing June 16.

DeWitt Baker, an investor who attended the hearing and said he lost more than a million dollars with Madoff, called it "fantastic" that Madoff's bail was revoked but belittled the apology.

"I don't think he has a sincere bone in his body," said DeWitt, who added that prison time would be too good for Madoff.

"I'd stone him to death," he said.

Madoff did not look at any of the three investors who spoke at the hearing, even when one turned in his direction and tried to address him.

The fraud, which prosecutors say may have totaled nearly $65 billion, turned a revered money man into an overnight global disgrace whose name became synonymous with the current economic meltdown.

Madoff described his crimes after he entered a guilty plea to all 11 counts he was charged with, including fraud, perjury, theft from an employee benefit plan, and two counts of international money laundering.

He told the judge that he believed the fraud would be short-term and that he could extricate himself. He implicated no one else, though investigators suspect involvement by relatives and top lieutenants who helped run his operation from its midtown Manhattan headquarters.

The plea came three months after the FBI claimed Madoff admitted to his sons that his once-revered investment fund was all a big lie -- a Ponzi scheme that was in the billions of dollars. Since his arrest in December, the scandal has turned the former Nasdaq chairman into a pariah who has worn a bulletproof vest to court.

The scheme evaporated life fortunes, wiped out charities and apparently pushed at least two investors to commit suicide. Victims big and small were swindled by Madoff, from elderly Florida retirees to actors Kevin Bacon and Kyra Sedgwick and Nobel Peace Prize winner Elie Wiesel.

Helicopters circled above the courthouse before the hearing, and federal officers with machine gun-style weapons stood outside as Madoff arrived.

Jilted investors signed in before entering the courtroom on the 24th floor. Richard and Cynthia Friedman turned up to get a glimpse of the man who defrauded them of their life savings of $3 million.

Richard Friedman, an accountant, noticed how well his clients were doing with Madoff and began investing his own money in 1991. He learned it was gone months before he had planned to retire -- a plan now on hold.

"I wanted him to see some of the faces of the people he lied to and destroyed," said Cynthia Friedman, 59, of Jericho, N.Y.

After arguments began on whether Madoff should remain free on bail, his lawyer Ira Sorkin described the bail conditions and how Madoff had, "at his wife's own expense," paid for private security at his penthouse.

Loud laughter then erupted among some of the more than 100 spectators crammed into the large courtroom on the 24th floor of the federal courthouse in lower Manhattan. The judge warned the spectators to remain silent.

George Nierenberg, the first of the three investors to speak, approached the podium glaring at Madoff, then said in the financier's direction: "I don't know if you had a chance to turn around and look at the victims."

At the hint of a confrontation, a marshal sitting behind Madoff stood up, and the judge directed Nierenberg to speak directly to the bench.

The courtroom erupted in applause after the judge announced Madoff would go directly to jail. As he was led out of court, a spectator yelled, "Hey, Bernie," but was shushed by investors in court and backed off.

The plea does not end the Madoff saga: Investigators are still undertaking the daunting task of unraveling how he pulled off the fraud for decades without being caught.

Court papers say Madoff generated or had employees generate "tens of thousands of account statements and other documents through the U.S. Postal Service, operating a massive Ponzi scheme," prosecutors said.

The money was never invested, but was used by Madoff, his business and others, prosecutors said.

Authorities said he confessed to his family that he had carried out a $50 billion fraud. In court documents filed Tuesday, prosecutors raised the size of the fraud to $64.8 billion.

Experts say the actual loss was more likely much less and that higher numbers reflect false profits he promised investors. So far, authorities have located about $1 billion for jilted investors.

In addition to prison time, he said Madoff faces mandatory restitution to victims, forfeiture of ill-gotten gains and criminal fines.

Obama administration launches housing plan

2009-03-04T14:42:00.003-05:00

The Obama administration kicked off a new program Wednesday that's designed to help up to 9 million borrowers stay in their homes through refinanced mortgages or loans that are modified to lower monthly payments.

Borrowers, however, are being advised to be patient in their efforts to get help because mortgage companies are likely to be flooded with calls.

Government officials, launching the "Making Home Affordable" program also acknowledge that the initiatives are only a partial fix for a sweeping problem that has helped plunge the U.S. economy into the worst recession in decades. In fact, tens of thousands of homeowners in some of the most battered real estate markets — concentrated in California, Florida, Nevada and Arizona — won't be eligible for the two programs.

"It's not intended to prevent every foreclosure or to help every homeowner," a senior Treasury Department official told reporters. "It's really targeted at responsible homeowners."

There was also skepticism that banks would be willing to participate.

"I've just seen so many of the programs not work," said Pava Leyrer, president of Heritage National Mortgage in Randville, Mich. "It gets borrowers hopes up. They call and call for these programs and we can't get anybody to do them."

The Obama administration's program has two parts: one to work with lenders to modify the loan terms for up to 4 million homeowner, the second to refinance up to 5 million homeowners into more affordable fixed-rate loans.

For the modification program, borrowers who are eligible will have to provide their most recent tax return and two pay stubs, as well as an "affidavit of financial hardship" to qualify for the loan modification program, which runs through 2012.

Borrowers are only allowed to have their loans modified once, and the program only applies for loans made on Jan. 1 2009, or earlier. Mortgages for single-family properties that are worth more than $729,750 are excluded.

Lenders could reduce a borrower's interest rate to as low as 2 percent for five years. Rates would then rise to about 5 percent until the mortgage is repaid.

If the plan works as intended, it could be a big plus for borrowers like Nick Kavalary, a network cable installer who lives outside Milwaukee.

Kavalary, 42, has been struggling with JPMorgan Chase & Co. to get a loan modification. He was finally approved for one this year, but it only cuts his interest rate to about 9.8 percent from 10.75 percent. Even at the lower rate, he said, making the payment is nearly impossible.

"If I can't pick up a second job, I'm going to lose this house," he said. "With the job market being the way it is, nobody's hiring nobody."

For the refinance program, only homeowners whose loans are held by Fannie Mae or Freddie Mac are eligible and have until June 2010 to apply.

Consumers should contact their loan servicer — the company that sends out their monthly bill — to find out if their mortgages are held by Fannie or Freddie. The two mortgage finance companies own or guarantee almost 31 million home loans — more than half of all U.S home mortgages.

Many mortgage brokers, however, are critical. They argue the fees imposed by Fannie and Freddie over the past year make it difficult for borrowers to afford to refinance. The two companies, which are now government controlled, have yet to detail how they will implement the plan, or whether any fees will be rolled back.

Meanwhile, action to put in place another part of Obama's housing plan is expected soon on Capitol Hill.

House Democrats agreed Tuesday to narrow proposed legislation that gives bankruptcy judges the power to change the terms of mortgage loans for debt-strapped borrowers.

In the latest version of the bill, judges would have to consider whether a homeowner had been offered a reasonable deal by the bank to rework his or her home loan before seeking help in bankruptcy court. Borrowers also would have a responsibility to prove that they tried to modify their mortgages.

Accused Financier Scammer Stanford Missing

2009-02-18T14:13:00.002-05:00

Texas financier R. Allen Stanford is accused of cheating 50,000 customers out of $8 billion dollars but despite raids Tuesday of his financial empire in Houston, Memphis, and Tupelo, Miss., federal authorities say they do not know the current whereabouts of the CEO.

The Securities Exchange Commission alleges Stanford ran a fraud promising investors impossible returns, much like Bernard Madoff's $50 billion alleged Ponzi scheme.

Investigators Tuesday shut down and froze the assets of three of the companies Stanford controls and they say the case could grow to be as big as the Madoff scandal. Like Madoff's clients, Stanford's investors are in shock.

"Initially we put our money in this institution and in a CD because we were nervous about the markets and thought it was a safe place," said investor Brett Zagone. "I'm so upset right now I can't even talk about it."

But in addition to angry clients, Stanford, like Madoff, has many friends in Washington.

Stanford's business is headquartered on the Caribbean island of Antigua. In the last decade, Stanford and his companies have spent more than $7 million on lobbyists and campaign contributions in efforts to loosen regulation of offshore banks.

Among the top recipients: Senator Bill Nelson (D-Fla.), Congressman Pete Sessions (R-Texas), Sen. John McCain (R-Ariz.), Senator Chris Dodd (D-Conn.) and Senator John Cornyn (R-Texas), one of the members who took a trip to Antigua where he was entertained by Stanford.

Sen Cornyn's office has said the trip "was strictly a fact-finding trip," and at the time, "there was nothing untoward or unseemly" about Stanford Financial.

Sen. Nelson said late Tuesday that he would return money received by Stanford. "I will give to charity any campaign contributions from him or his employees," Nelson said through his spokesman.

A McCain spokesperson said Wednesday that all contributions from Stanford would be donated. "The McCain Campaign is donating all contributions from R. Allen Stanford, and from individuals associated with Stanford Financial, to charity." This spokesperson said they will donate contributions made to both McCain's Presidential and Senate campaigns, but did not have a dollar amount.

Stanford himself did not contribute to the McCain Presidential campaign. He gave the maximum $4,600 contribution to President Obama's campaign. Indeed, Obama returned $2,300 that was contributed over the limit to Stanford.

Some say the investigation into Stanford should include an examination of his relationships with members of Congress.

"Surely there has to be a part of the investigation to look at what was done in Congress and whether the money that was spent to lobby and make political contributions played any role in all of this," said Sheila Krumholz of the Center for Responsive Politics.

Once again, this could be another case of the SEC asleep at the switch. Allegations of fraud and possible drug money laundering have been made against Stanford in the past ten years, but the SEC took action only after two former employees filed a lawsuit in civil court.

Financier charged with $9.2B fraud

2009-02-17T16:00:00.002-05:00

The Securities and Exchange Commission said Tuesday that it has charged financier R. Allen Stanford and three of his companies with orchestrating a $9.2 billion investment and sales fraud.

The SEC's complaint alleges that the fraud centered on a CD program in which Stanford International Bank promised "improbable and unsubstantiated high interest rates."

SIB, based in Antigua, allegedly acted through a network of Stanford Group Company financial advisers to sell approximately $8 billion of "certificates of deposit" to investors.

The SEC's complaint also alleged an additional scheme relating to $1.2 billion in sales.

The bank boasted a unique investment strategy that it said allowed it to receive double-digit returns on its investments for the past 15 years, the SEC said.

"We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world," Rose Romero, director of the SEC's Fort Worth regional office, said in the statement.

The SEC also charged Stanford International's chief financial officer James Davis as well as Laura Pendergest-Holt, chief investment officer of Stanford Financial Group. The third company named in the complaint is investment adviser Stanford Capital Management.

According to the release, U.S. District Judge Reed O'Connor issued a temporary restraining order, and froze the defendants' assets.

Early Tuesday, CNBC reported federal marshals were seen entering the offices of Stanford Financial Group in Houston. Reuters reported an eyewitness saw a sign taped to the window stating the company is now "under the management of a receiver."

SEC alleges false financial claims
According to the SEC's complaint, filed in federal court in Dallas, the defendants told CD purchasers that their deposits were safe, falsely claiming that the bank re-invests client funds primarily in the portfolio; monitors the portfolio through a team of more than 20 analysts; and is subject to yearly audits by Antiguan regulators.

Amid the news of Bernard Madoff's massive Ponzi scheme, SIB falsely claimed the bank has no "direct or indirect" exposure to the Madoff scheme, the statement said.

Stanford's inner circle
According to the SEC's complaint, a close circle of Stanford's family and friends operates SIB.

Its investment committee, responsible for managing the bank's multibillion-dollar portfolio of assets, includes Stanford; Stanford's father, who lives in Mexia, Tex.; another Mexia resident with business experience in cattle ranching and car sales; Pendergest-Holt, who had no financial or securities experience prior to joining SFG; and Davis, Stanford's college roommate.

SIB's Web site claims its network has $51 billion in deposits and assets under management or advisement, with more than 70,000 clients in 140 countries.

$20 million cricket match
In September, Forbes named Stanford No. 205 in its 400 Richest Americans article. He's used some of his billions to spark interest in cricket.

In 2006, he founded the "Stanford 20/20 Tournament," a single-elimination knockout cricket competition held in Antigua featuring 20 teams from several Caribbean territories competing for $1 million.

Stanford topped that in 2008 with the "Stanford Super Series," in which four teams competed for $20 million - the largest team prize for a single sporting match, according to the series' Web site.

An additional scheme
The SEC accused Stanford Group Company with an additional scheme relating to $1.2 billion in sales. It is alleged that SGC advisers used materially false historical performance data to create a mutual fund program called Stanford Allocation Strategy, the release said.

According to the complaint, the false data helped grow the program from less than $10 million in 2004 to more than $1 billion, generating SGC - and ultimately, Stanford - about $25 million in 2007 and 2008.

That fraudulent performance helped recruit registered investment advisers, who were then given heavy incentives to move their clients' assets to SIB's CD program, the release said.

SEC, Madoff agree to settle civil fraud case

2009-02-09T14:32:00.003-05:00

The Securities and Exchange Commission on Monday announced an agreement with disgraced money manager Bernard Madoff that could eventually force him to pay a civil fine and return money raised from investors.

The partial judgment, which renders permanent a preliminary injunction that froze Madoff's assets after his arrest in December, must be approved by the judge overseeing the case in federal court in Manhattan.

The civil proceeding is separate from the criminal case against the prominent Wall Street figure, who is accused of bilking $50 billion from investors in what may be the largest Ponzi scheme in history. Madoff was arrested on Dec. 11 after allegedly confessing to his sons that he had stolen from investors for years.

Federal prosecutors have asked a judge to revoke the bail of Madoff, who has been confined to his Manhattan penthouse under house arrest. Madoff, who has not been indicted, is widely expected to eventually enter into a criminal deal with prosecutors in which he would plead guilty in exchange for some form of leniency.

The SEC said Madoff agreed to the partial judgment without admitting or denying the allegations in its civil complaint filed on Dec. 11. However, the agreement says Madoff cannot contest the "facts" of the complaint for the purposes of determining his obligation to pay civil fines and restitution — which will be specified later.

The SEC says the basic facts of the complaint are that Madoff committed a $50 billion fraud and told his sons his investment business was a sham. Madoff told them he had "absolutely nothing," that "it's all just one big lie," and was "basically, a giant Ponzi scheme," according to the complaint.

Madoff's defense attorney, Ira Sorkin, didn't immediately return a telephone call seeking comment Monday.

The fallout from the Madoff affair has been massive and has rocked a Wall Street already churning from the financial crisis. Thousands of victims who lost money investing with Madoff have been identified — including ordinary people and Hollywood celebrities — as well as big hedge funds, international banks and charities in the U.S., Europe and Asia.

The scandal also has brought disgrace to the SEC, which repeatedly ignored credible allegations about Madoff's operations brought to it over the course of decade. Congress and the agency's inspector general are investigating what caused the regulatory failure over Madoff and why SEC inspections of his business failed to detect the improprieties.

Jobless rate jumps to 7.6 percent, 598K jobs lost

2009-02-06T09:55:00.003-05:00

Recession-battered employers eliminated 598,000 jobs in January, the most since the end of 1974, and catapulted the unemployment rate to 7.6 percent. The grim figures were further proof that the nation's job climate is deteriorating at an alarming clip with no end in sight.

The Labor Department's report, released Friday, showed the terrible toll the drawn-out recession is having on workers and companies. It also puts even more pressure on Congress and President Barack Obama's administration to revive the economy through a stimulus package and a revamped financial bailout plan, both of which are nearing completion.

The latest net total of job losses was far worse than the 524,000 that economists expected. Job reductions in November and December also were deeper than previously reported.

With cost-cutting employers in no mood to hire, the unemployment rate bolted to 7.6 percent in January, the highest since September 1992. The increase in the jobless rate from 7.2 percent in December also was worse than the 7.5 percent rate economists expected.

All told, the economy has lost a staggering 3.6 million jobs since the recession began in December 2007. About half of this decline occurred in the past three months.

"Companies are in survival mode and are really cutting to the bone," said economist Ken Mayland, president of ClearView Economics. "They are cutting and cutting hard now out of fear of an uncertain future."

Factories slashed 207,000 jobs in January, the largest one-month drop since October 1982, partly reflecting heavy losses at plants making autos and related parts. Construction companies got rid of 111,000 jobs. Professional and business services chopped 121,000 positions. Retailers eliminated 45,000 jobs. Leisure and hospitality axed 28,000 slots.

Those reductions swamped employment gains in education and health services, as well as in the government.

Just in the 12 months ending January, an astonishing 3.5 million jobs have vanished, the most on record going back to 1939, although the total number of jobs has grown significantly since then.

Employers are slashing payrolls and turning to other ways to cut costs — including trimming workers' hours, freezing wages or cutting pay — to cope with shrinking appetites from customers in the U.S. and overseas, who are struggling with their own economic troubles.

The average work week in January stayed at 33.3 hours, matching the record low set in December.

With no place to go, the number of unemployed workers climbed to 11.6 million.

Over the past 12 months, the number of unemployed has increased by 4.1 million, and the unemployment rate has risen by 2.7 percentage points.

Job hunters also are facing longer searches for work.

The average time it took for an unemployed person to find any job — full or part time — rose to 19.8 weeks in January, compared with 17.5 weeks a year ago, underscoring the increasing difficulty the out-of-work are having in finding a new job.

Workers with jobs saw modest wage gains.

Average hourly earnings rose to $18.46 in January, up 0.3 percent from the previous month. Over the year, wages have risen 3.9 percent.

An avalanche of layoffs is slamming the nation from a wide swath of employers.

Caterpillar Inc., Pfizer Inc., Microsoft Corp., Estee Lauder Cos., Time Warner Cable Inc., and Sprint Nextel Corp. are among the companies slicing payrolls. Manufacturers — especially car makers — construction companies and retailers have been particularly hard hit by the recession. Talbots Inc., Liz Claiborne Inc., Macy's Inc. and Home Depot Inc. are all cutting jobs. So are Detroit's General Motors Corp. and Ford Motor Co.

Americans cut back sharply on spending at the end of last year, thrusting the economy into its worst backslide in a quarter-century. The tailspin could well accelerate in the current January-March quarter to a rate of 5 percent or more as the recession drags on into a second year, and consumers and businesses burrow deeper.

Vanishing jobs and evaporating wealth from tanking home values, 401(k)s and other investments have forced consumers to retrench, which has required companies to pull back. It's a vicious cycle where the economy's problems feed on each other, perpetuating a downward spiral.

Many economists predict the current quarter — in terms of lost economic growth — will be the worst of the recession.

With fallout from the housing, credit and financial crises — the worst since the 1930s — ripping through the economy, analysts predict 3 million or more jobs will vanish this year even if lawmakers quickly approve Obama's stimulus plan, which has ballooned to more than $900 billion in the Senate.

Obama has repeatedly pressed Congress to swiftly enact a package of increased government spending, including big public works projects and tax cuts, to revive the economy and create jobs. He says his plan will save or create more than 3 million jobs in the next two years.

But the recession has proven stubborn. Despite record low interest rates ordered by the Federal Reserve and a raft of radical programs, including a $700 billion financial bailout, consumers and businesses face high hurdles to borrow money. Foreclosures are skyrocketing, home prices are sinking and Wall Street remains on edge.

Madoff client list peppered with big names

2009-02-05T14:11:00.001-05:00

Hall of Fame baseball pitcher Sandy Koufax, actor John Malkovich and World Trade Center developer Larry Silverstein are among the well-known people who were customers of accused swindler Bernard Madoff, according to new court papers.

Among the thousands of others on the roster are U.S. Sen. Frank Lautenberg of New Jersey; Fred Wilpon, owner of the New York Mets baseball team; imprisoned class-action lawyer Melvyn Weiss; Madoff's sons, Mark and Andrew and their children as well as Madoff's brother, Peter.

Filmmaker Steven Spielberg's Wunderkinder Foundation, Columbia University and the charity Jewish Funds for Justice are among other customers listed.

The 162-page document was filed late Wednesday with the U.S. Bankruptcy Court in New York as a court-appointed trustee liquidates Bernard L. Madoff Investment Securities LLC to recover assets for defrauded customers.

In all, five lists were filed with the court, labeled Customers, Vendors, Employees, Brokers/Dealers and Other Parties.

The customer list contains names and addresses of individuals and institutions. No details were included on the amounts of money invested. The lists were put together by AlixPartners LLP, a firm specializing in bankruptcy claims support that is assisting the trustee.

One of Madoff's lawyers, Ira Lee Sorkin, is also named on the customer list.

Sorkin declined to comment to Reuters on Thursday on whether he had invested with Madoff.

"I've been told it's a client list, and I've also been told it's a mailing list, so I think you need to check with the receiver or the trustee to determine whether these individuals are clients, customers, investors or just simply received mail," Sorkin said.

"My position from day one has been I will not discuss present clients or former clients," he said.

The Securities Investor Protection Corporation (SIPC), which is examining Madoff customer claims, was not immediately available for comment. A representative of the trustee, Irving Picard, could not be reached immediately.

The list provides new details about the clients that the once-respected Madoff cultivated over the years -- a roster sprinkled with names of people who live in affluent neighborhoods of Manhattan and parts of South Florida including Palm Beach and Boca Raton. Madoff long attracted clients through his reputation for posting amazingly consistent investment returns.

The Manhattan office of Madoff's firm was declared a crime scene after the 70-year-old investment manager was arrested on Dec. 11. Madoff is accused in what authorities have described as the biggest Ponzi scheme in history. In a Ponzi scheme, early investors are paid with money from new investors.

Also listed are the Madoff firm's outside auditors, David Friehling and Jerome Horowitz from the small Friehling & Horowitz accounting firm in New City, New York, as well as Madoff's wife, Ruth, and Madoff employees, including JoAnne "Jodi" Crupi and Frank DiPascali.

Among the financial institutions on the customer list are UBS AG, Bank of America Corp, BNP Paribas and Citigroup Inc.

Financiere Agache, a subsidiary of the holding company of French billionaire Bernard Arnault, was also on the list. Arnault is the head of luxury goods group LVMH and his Groupe Arnault holding firm controls Financiere Agache.

A spokesman for Financiere Agache told Reuters its account with Madoff had been inactive since 2004, although it had not been legally closed. The spokesman added that Financiere Agache had not booked any losses from the account.

At a bankruptcy court hearing on Wednesday, Picard said $946 million has been recovered so far from Madoff's firm. He said, however, that gaining access to the firm's computers and examining 7,000 unmarked boxes of documents stored in a warehouse was taking time.

Tens of thousands more layoffs are announced

2009-01-26T15:51:00.006-05:00

It's already been a lousy year for workers less than a month into 2009 and there's no relief in sight. Tens of thousands of fresh layoffs were announced Monday and more companies are expected to cut payrolls in the months ahead.

A new survey by the National Association for Business Economics depicts the worst business conditions in the U.S. since the report's inception in 1982.

Thirty-nine percent of NABE's forecasters predicted job reductions through attrition or "significant" layoffs over the next six months, up from 32 percent in the previous survey in October. Around 45 percent in the current survey anticipated no change in hiring plans, while roughly 17 percent thought hiring would increase.

The recession, which started in December 2007, and is expected to stretch into this year, has been a job killer. The economy lost 2.6 million jobs last year, the most since 1945. The unemployment rate jumped to 7.2 percent in December, the highest in 16 years, and is expected to keep climbing.

"Job losses accelerated in the fourth quarter, and the employment outlook for the next six months has weakened further," said Sara Johnson, NABE's lead analyst on the survey and an economist at IHS Global Insight.

Thousands more jobs cuts were announced Monday. Pharmaceutical giant Pfizer Inc., which is buying rival drugmaker Wyeth in a $68 billion deal, and Sprint Nextel Corp., the country's third-largest wireless provider, said they each will slash 8,000 jobs. Home Depot Inc., the biggest home improvement retailer in the U.S., will get rid of 7,000 jobs, and General Motors Corp. said it will cut 2,000 jobs at plants in Michigan and Ohio due to slow sales.

Caterpillar Inc., the world's largest maker of mining and construction equipment, announced 5,000 new layoffs on top of several earlier actions. The latest cuts of support and management employees will be made globally by the end of March. An additional 2,500 workers already have accepted buyout offers, and ties have been severed with about 8,000 contract workers worldwide. In addition, about 4,000 full-time factory workers already have been let go.

Just last week, Microsoft Corp. said it will slash up to 5,000 jobs over the next 18 months. Intel Corp. said it will cut up to 6,000 manufacturing jobs and United Airlines parent UAL Corp. said it would get rid of 1,000 jobs, on top of 1,500 axed late last year.

The NABE survey of 105 forecasters was taken Dec. 17 through Jan. 8.

Also in the survey, 52 percent said they expected gross domestic product to fall by more than 1 percent this year. GDP measures the value of all goods and services produced within the U.S. and is the best barometer of the country's economic fitness. The last time GDP fell for a full year was in 1991, a tiny 0.2 percent dip. The economy shrank by 1.9 percent in 1982, when the country was suffering through a severe recession.

Forecasters have grown more pessimistic about the outlook. In the October survey, no forecaster thought GDP would fall by more than 1 percent.

In terms of business conditions, more reported customer demand dropping, capital spending reductions and shrinking profit margins.

Peoria, Ill.-based Caterpillar also reported Monday that its fourth-quarter profit plunged 32 percent. The company expects sharply lower results this year as global economic problems cut into its business.

Altogether the NABE report "depicts the worst business conditions since the survey began in 1982, confirming that the U.S. recession deepened in the fourth quarter of 2008," Johnson said.

Many analysts predict the economy will have contracted at a pace of 5.4 percent in the fourth quarter when the government releases that report on Friday. If they are correct, that would mark the worst performance since a 6.4 percent drop in the first quarter of 1982. The economy is still contracting now — at a pace of around 4 percent, according to some projections.

Economic crisis hitting men harder than women

2009-01-22T09:00:00.006-05:00

The economic crisis is hitting men much harder than women in the workplace, largely because male-dominated industries like construction and transportation are bearing the brunt of job losses, figures show.

Women, meanwhile, dominate sectors that are still growing, like government and healthcare, experts said.

"It's men that have taken the hit," said Andrew Sum, director of the Center for Labor Market Studies at Northeastern University in Boston. "It's been an overwhelmingly male phenomena."

Four-fifths of the 2.74 million people who lost their jobs between November 2007 and November 2008 were men, Sum said.

The biggest losses came in construction, where men comprise 87 percent of the work force, he said. Large losses also came in manufacturing and wholesale trade, where men make up more than two-thirds of the work force, he said.

"Males were dominant in sectors that were taking a bad hit," he said. "It's men and the blue-collar jobs. It's overwhelming."

According to the U.S. Bureau of Labor Statistics, men's employment as a ratio of the population dropped by 2.7 percent, while the ratio among women's dropped 0.8 percent from December 2007 to December 2008. The unemployment rate among men rose to 7.9 percent from 5.0, while among women, it rose to 6.4 percent from 4.8 percent, the agency said.

The gap between men's and women's unemployment is the highest since 1983, said Heather Boushey, senior economist at the Center for American Progress.

"The recession started with the collapse of the housing bubble," Boushey said. "Clearly we've seen significant layoffs in the construction industry and other sectors, and that really has been driving this problem."

Meanwhile, women are strongly represented in sectors that are still growing, experts noted.

Health and education sectors -- where three-quarters of workers are women -- added 536,000 jobs, Sum said.

Women office workers, like receptionists and clerical workers, have suffered losses. The sector, more than 70 percent female, has lost about 800,000 jobs, Sum said.

Women accounted for 102,000 of the 134,000 lost in the financial sector, Boushey said. But job loss in that industry has been relatively small, compared to manufacturing jobs, she said.

Women may see more job losses ahead in the financial sector, where they hold about 59 percent of jobs, Sum said.

"They're just beginning to lay off," he said. "I expect to see more business-related losses in the months ahead."