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Vladimir V. Putin’s return to the Kremlin in 2012 diminishes the possibility that Russia will evolve into a stable democracy.
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The special inspector general for the Troubled Asset Relief Program said auditors questioned $8.1 million of a sampling of $9.1 million in bills from four law firms paid by Treasury’s Office of Financial Stability.
The firms submitted bills with either no descriptions or vague descriptions of the work performed, unsupported expense charges and administrative charges that were not allowed under their contract, the inspector general’s report said.
The most striking examples of problematic bills were from Simpson Thacher Bartlett, the report said.
“Simpson Thacher billed O.F.S. $5.8 million in fees and expenses with bills that provided no detail whatsoever as to the work performed,” the report said.
Later, however, the report mentions that Simpson Thacher provided corporate law advice related to bank bailout investments and the sale of Citigroup stock.
In a statement that made no direct reference to the report, Simpson Thacher said “Our team of highly qualified lawyers worked closely with the Treasury staff on a daily basis to structure and implement TARP programs that played a key role in stabilizing the U.S. financial system.”
The watchdog, which investigates waste and fraud in the bailout program, also examined bills from Cadwalader Wickersham Taft, Locke Lord Bissell Liddell and Bingham McCutchen, formerly McKee Nelson L.L.P.
The report said that although auditors questioned bills from all of the law firms, it did not mean that all of the fees and expenses were unreasonable.
“These services were of high quality and critical to the success of our programs,” a Treasury Department spokesman, Mark Paustenbach, said. “We believe the procedures we followed ensured that taxpayers received good value.”
As of March, the office that runs the relief program had paid the four firms legal fees and expenses totaling more than $25.5 million, the audit said.
“O.F.S. should determine the allowability of $7,980,215 in unsupported legal fees and expenses paid to the law firms,” it concluded.
The report also recommended that Treasury try to recover $91,482 in “ineligible” fees and expenses paid to Simpson Thacher.
But the report did not question the quality of legal work done by the firms and noted that Treasury had negotiated billing rates equal to or lower than those obtained by other federal agencies and substantially lower than the respective firms’ standard rates.
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Or more likely, newspaper officials guess, the lesson is very local: Either someone really, really wanted people to be able to read that week’s newspaper, or someone really, really did not.
The papers, which originally printed a combined 8,620 copies for newsstand sales, had to print 5,500 more to keep up with the demand, which seemed to come almost entirely from two customers buying up every available copy at $1.50 each from 7-Eleven stores and bagel shops from Calverton to Shelter Island.
About 30 outlets reported bulk purchases, and the two buyers apparently snapped up about 4,000 copies, costing roughly $6,000, according to TimesReview Newsgroup, which publishes three community weeklies and several tourism-related publications.
Troy Gustavson, the company’s owner, said that in 50 years in the newspaper business he had never experienced a similar bulk purchase.
In a column in the editions on Thursday, he speculated, tongue in cheek, that the sales spurt could have been the work of “someone involved in a truly monumental school project; someone really proud of their grandchild on the honor roll; someone with a great deal of precious glassware to pack; or, as I suspect, someone intent on suppressing the dissemination of a particular news story.”
Narrowing things a bit, Mr. Gustavson speculated on possible buyers.
They included proud members of the 125-year-old Southold Fire Department; proud members of the Shoreham-Wading River football team, which had defeated Greenport, 19-0; local political operatives concerned about the opposition’s attack advertisements; or supporters of a Riverhead doctor charged with Medicare fraud, who was the subject of an investigative piece in the papers that flew off the racks.
He also cited some articles in the two papers’ coverage that had overlapped.
They included an account of Suffolk County’s being accused of wrongfully diverting money from a preservation fund, a report on the former basketball star Charles Barkley singing karaoke in Riverhead, and the report on the doctor, Dr. Jesse Stoff, 55, of the East End Wellness Center in Riverhead.
A high-profile doctor specializing in alternative medical approaches, he was arrested in Queens on Sept. 7 after a grand jury indictment on charges of conspiracy to pay and receive health care kickbacks, six counts of health care fraud and one count of health care fraud conspiracy.
He pleaded not guilty to all charges.
No one responded to a phone call to the clinic on Thursday, but Dr. Stoff’s lawyer, Andrea Likwornik Weiss, said he was not guilty of the charges and was not behind the bulk newspaper purchases.
“He had nothing whatsoever to do with it,” she said. “He didn’t do it, and he didn’t tell someone to do it.”
The company on Thursday posted online a surveillance tape of a woman at a 7-Eleven in Riverhead buying dozens of copies of the two newspapers and putting them in the trunk of her car.
Mr. Gustavson emphasized that the purchasers’ identities and motives remained unknown.
The sales were not illegal, and newspapers, especially these days, are seldom unhappy about unexpected sales. Still, he said that in the age of the Internet, if anyone was trying to suppress a story, bulk purchases went only so far.
“We do have our suspicions as to who is behind this,” Andrew Olsen, the newspapers’ publisher, said in a statement, “but so far we have no hard proof.
“But if it’s someone attempting to somehow silence our coverage or make an uncomfortable story go away, they’re wasting their time and their money.”
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Matthew Barzun, a son-in-law, said the cause was complications of pneumonia.
Mr. Brown was a former chief executive of Brown-Forman, the company founded in Louisville in 1870 by his great-grandfather George Garvin Brown. The company’s first brand, Old Forester Kentucky Straight Bourbon Whisky, was America’s first bottled bourbon and remains one of Brown-Forman’s strongest sellers.
Mr. Brown worked his way up the ranks of the family business, becoming chief executive in 1993. Two years later, he added the title of chairman.
Besides expanding into foreign markets under Mr. Brown’s leadership, Brown-Forman also introduced a number of new products. In 1995, it released Tropical Freezes, which the company calls the first blended freezer cocktails. The drink, which comes in a foil package, was another big seller. In 2002, Brown-Forman joined with Miller Brewing to produce Jack Daniel’s Hard Cola.
But he resisted calls for merging Brown-Forman with another company. Speaking in June, he said mergers could “breed arrogance and complacency, and even a sense of entitlement.”
“One thing seems clear to me,” he said, “pursuing size for its own sake is a very poor choice.”
Mr. Brown lived in Louisville and was a leading philanthropist there. He is survived by his wife, Christy; his brothers W. L. Lyons Brown Jr., known as Lee, and Martin Shallenberger Brown Sr.; a sister, Ina Brown Bond; his children Owsley Brown III, Brooke Barzun and Augusta Holland; and nine grandchildren.
Mr. Barzun, a former United States ambassador to Sweden and now President Obama’s national campaign finance chairman, said Mr. Brown “deserves credit for turning a great American company into a great global company.”
He said his father-in-law favored tradition and quality, be it in his choice of drink, his vision for Brown-Forman or his hopes for Louisville. In June, Mr. Brown received a corporate citizenship awarded from the Woodrow Wilson International Center for Scholars, based in Washington, D.C.
Mr. Brown’s favorite drink, he said, was Old Forester Bourbon over ice with a splash of water or club soda.
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The trustee for Bernard L. Madoff’s fraud victims said on Thursday that he had overestimated how much his recovery efforts would be affected by a court ruling this week in his case against the owners of the New York Mets.
The practical effect of the ruling, released on Tuesday by Judge Jed S. Rakoff of United States District Court in Manhattan, will be to reduce the amount of money the trustee, Irving H. Picard, can seek in court by $6.2 billion — not by $11 billion, as the trustee’s lawyers reported on Wednesday.
In his ruling in the Mets case, Judge Rakoff allowed the trustee to seek only the return of fictional profits paid out to the Mets owners, Fred Wilpon and Saul Katz, during the two years before the Madoff fraud collapsed in December 2008.
The trustee had sought to recover fictional profits paid out in the six years before the collapse, citing provisions of New York State law that allow for a six-year recovery window. The judge also threw out the trustee’s bid to recover so-called preference claims, the cash paid out to the team’s owners in the final 90 days of the fraud.
By reducing the time window and eliminating preference claims — actions that lawyers said would most likely apply to all the lawsuits the trustee has pending in Federal Bankruptcy Court in Manhattan — the decision still “has significant potential ramifications that could affect recoveries as well as distributions” in the legal efforts to unwind Mr. Madoff’s epic Ponzi scheme, Mr. Picard said in a written statement released on Thursday.
If the ruling had come at the onset of the fraud case, the effect would have roughly matched the estimate given on Wednesday by Mr. Picard’s lawyer, David J. Sheehan. But some cases have already been settled out of court and most likely will not be affected by the ruling; once those were sifted out, the effect was reduced to $6.2 billion, made up of at least $2.7 billion in fictional profits and $3.5 billion in preference claims.
It says much about the scale of the case that an adverse effect of $6.2 billion, rather than $11 billion, can be viewed with relief among lawyers trying to recover cash to repay Mr. Madoff’s victims, who claimed paper losses of almost $65 billion and cash losses of about $18 billion.
Mr. Picard has filed lawsuits seeking a total of about $100 billion from a number of giant global banks and large investors. He has previously said that any money he recovers in excess of the $18 billion in cash principal lost by many Madoff investors could be used to cover general fraud claims that can be asserted by all investors bilked by Mr. Madoff, even if they recovered all their principal before the fraud collapsed.
The trustee has already collected $10.6 billion, largely through out-of-court settlements, and had been scheduled to make his first cash distribution to eligible investors on Friday. But “in an abundance of caution,” Mr. Sheehan said on Thursday, the trustee has decided to delay those payments until his staff can more fully examine the implications of Judge Rakoff’s ruling on the roster of eligible claims.
“We know how difficult this delay is for those who have waited so long to recover the money they lost to Madoff,” he said. “We are committed to completing this analysis quickly and moving forward with this important distribution as soon as we possibly can.”
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Shares of some Chinese companies listed on exchanges in the United States tumbled on Thursday after a top American regulator said that the Justice Department was reviewing accounting irregularities at various companies based in China.
Chinese Internet companies were particularly hard hit, including Youku and Tudou, Chinese video posting sites, as well as Baidu, Sohu and Sina, also Internet stocks. The drop in share prices came after Reuters published an interview with Robert Khuzami, the enforcement chief at the Securities and Exchange Commission, who indicated that federal prosecutors were looking into possible accounting frauds.
“There are parts of the Justice Department that are actively engaged in this area,” Mr. Khuzami said, according to Reuters.
The S.E.C. confirmed his comments. The Justice Department declined to comment.
Youku’s American depository receipts closed down 18 percent, Tudou ended down 10 percent, Baidu fell 9 percent, Sohu dropped almost 5 percent and Sina fell nearly 10 percent.
Not all United States-listed Chinese companies suffered — some stocks rose during the session, including LDK Solar’s American depository receipts, which rose more than 1 percent.
An area of particular interest for regulators has been so-called reverse merger companies. These go public by purchasing the shares of defunct public companies and assuming their tickers. In recent months, such companies have been criticized by researchers who claim to have found repeated instances of fraud in their accounting.
The Securities and Exchange Commission has halted trading in more than a dozen such stocks this year, often after auditors have resigned over accounting irregularities. While some Chinese companies have fired auditors, others have restated earnings or owned up to lying about assets. These admissions have cost billions of dollars in market value and harmed other reverse-merger companies that have not been accused of any wrongdoing.
The share prices of a number of reverse merger companies fell sharply on Thursday, including AgFeed Industries and China Auto Logistics.
The steep losses in stocks have also prompted a wave of shareholder lawsuits against companies, auditors and even the banks that ushered these companies to market. One in every four federal securities class-action lawsuits filed this year relates to such firms, according to a study published this summer by the Securities Class Action Clearinghouse at Stanford Law School and Cornerstone Research in Boston.
One recent high profile example is Sino-Forest, whose share price was decimated after Muddy Waters Research charged that it was falsely claiming assets and that it amounted to a Ponzi scheme. China MediaExpress and Duoyuan Global Water are other reverse-merger companies whose stock prices have tumbled this year after accusations of fraud.
Reverse mergers have enabled companies to tap the American capital markets without having to undergo the arduous process of an initial offering.
But as more and more of these companies come under fire from bloggers and investors betting against their share prices, the government has started to take a closer look at them.
The S.E.C. has sent a steady stream of warnings to investors about the risks associated with investing in such companies. Exchanges have delisted the companies that have fallen under scrutiny or failed to file disclosures and statements in a timely manner.
But while the S.E.C. has been vocal about its investigation of these firms, it was unclear until the interview with Mr. Khuzami whether the Justice Department was looking into these allegations as well.
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“He said, ‘You’ll get hurt if you do anything,’ ” the husband later said, asking that his family and their street not be identified for fear of being further victimized. “They took us into the bedroom and made us kneel down. I was very scared that we might be shot.”
But the invaders were not there to kill — they wanted gold. The men ripped chains off the wife’s neck, tore at the husband’s bracelet and then ransacked the home until they found the rest of the jewelry, worth as much as $25,000. The thieves have not been caught.
That the family had so much gold is not unusual. As immigrants from India, it is their tradition to own and wear gold. The precious metal indicates prosperity, is a means of savings, and some gold jewelry can signify a woman’s marital status. It is a common wedding gift in many Indian cultures.
Thieves, it appears, have learned of these traditions, leading to a rash of robberies throughout Silicon Valley’s Indian-American communities in recent months. Indian-Americans are one of the fastest-growing Bay Area populations, and in Santa Clara County alone their number nearly doubled, to 111,000, in the past decade, according to the United States census.
The exact number of gold thefts is difficult to determine because the crimes have happened in several jurisdictions and victims’ ethnicity is not always made public. But interviews with the police, government and civic leaders, and representatives of the region’s Indian-American community confirmed the trend and growing alarm.
“It increased significantly nine months ago,” said Anu Natarajian, a Fremont city councilwoman. “It’s not a random thing that’s happening. People are afraid. People are nervous about it.”
Sgt. Jeff Swadener of the Fremont Police Department said Indian-Americans were known for owning high-quality gold of 20 and 22 karats. With the price of gold surging since the recession began ($1,614 per ounce on Thursday), that makes them lucrative targets.
“You’ll get just as much out of a house as you would robbing a bank,” Sergeant Swadener said, adding that criminals also know that the criminal charges for burglarizing homes are lesser than those for robbing a bank.
Most of the thefts have happened while residents were not home, and had inadvertently advertised the fact through another tradition: they leave their shoes outside the home on stoops or in racks.
“No shoes, no one home,” Sergeant Swadener said.
But the incident in Fremont has elevated the crimes to a new level of concern. The home invasion was ignored by mainstream news media, but the news that a family, including a young boy, was forced to kneel as if awaiting execution has swept through the Indian-American community.
“We got concerned when we heard the family was held at gunpoint,” said Krati Rungta, co-founder of Bay Area Desi, a year-old Web site for Indians. Ms. Rungta said people worried that their traditions had made them “easy targets.”
Tanuja Bahah, executive director of the Indian Community Center in Milpitas, said, “In India, gold is seen as security.” For women who did not work outside their home, Ms. Bahah said, gold represents a nest egg of reliable value.
Indeed, gold has taken on such meaning for many since the recent recession began, not just those of Indian heritage. With gold prices so high, the nation has seen a proliferation in businesses that buy jewelry for its gold value, often with no questions asked, allowing thieves to easily and quickly profit from stolen goods.
Robberies of gold jewelry have been reported throughout the Bay Area in recent months, including at BART stations, and on Sept. 18 a gold dealer in Hayward was shot to death at his home.
A sense of urgency about being singled out is emerging among Indian-Americans. There is talk of leaving old shoes outside the front door, so it would appear that a home was occupied. In the Fremont area where the family was robbed, residents have asked for more police patrols and are forming a neighborhood crime watch group.
That effort is helping the traumatized family recover, though slowly. “Every time someone rings the doorbell, we feel a twitch of fear,” the husband said.
sjames@baycitizen.org
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So it was in the United States. To allow people to buy homes they really could not afford, banks offered mortgages with artificially low monthly payments in the early years. When home prices fell, the mortgages blew up.
So, too, it was in Hungary, where home mortgages were relatively rare until the banks made it possible for buyers to avoid high interest rates, but with a big risk.
Mortgages denominated in foreign currencies became wildly popular, because that way borrowers could get low interest rates, and thus afford to buy homes that would otherwise be out of reach. But then the local currency, the Hungarian forint, plunged in value, and homeowners faced rapidly rising monthly payments. They owed more forints than they had borrowed.
In the United States, the sanctity of contracts has generally prevailed. The banks have been forced to pay multibillion-dollar penalties for bad behavior, but that does little for the anguished homeowners.
In Hungary, the populist government has decided it is the banks — mostly foreign-owned — that should suffer. Under a new law, signed by Hungary’s president this week, persons with loans denominated in Swiss francs can pay them off using an exchange rate of 180 Hungarian forints to the franc — about a 25 percent discount to the current market rate of almost 240 forints. There are similar bargains offered on loans denominated in euros and Japanese yen.
It is not clear how much this will really help homeowners. Few of them have the money on hand to pay back their loans, and to get the money they presumably would have to borrow from banks. Andras Simor, the governor of Hungary’s central bank, estimates that only one-fifth of borrowers will be able to take part.
The move has outraged the financial establishment of Europe. It represents a serious breach to the patterns followed in much of the world since the financial crisis burst open three years ago. Banks have lost a lot of money, and been bailed out, but bank executives have done quite well. Those who lent money to banks have generally gotten all their money back. Customers by and large have been forced to bear the brunt of their behavior, whether or not there was evidence the banks had misled them.
In Hungary, the lure of foreign currency loans back in 2005 was clear. Interest rates on mortgages denominated in Swiss francs were around 4 percent, while rates on forint loans could be in the double digits. Thanks to the lower monthly payments, a buyer could qualify for a Swiss franc loan who could not hope to get a loan in local currency. Soon a vast majority of mortgage loans were made in Swiss francs.
The risk was obvious. All the borrowers had income in forints, not francs. If the forint lost value, their loan payments could multiply.
Now the government claims that banks misled borrowers. The extent to which that is true is hard to gauge. But there is no doubt that a widely voiced theory was that because Hungary was a growing economy, its currency should appreciate against the staid old currencies of Western Europe. And that is exactly what happened in the years running up to the credit crisis. Those who failed to take out mortgages in Swiss francs or euros looked foolish.
When the forint began to lose value, banks did try to ameliorate the situation. In 2009, they offered to extend loan periods, so that homeowners could make lower monthly payments that would last for more years.
Earlier this year, with the forint around 220 to the franc, the banks came up with a plan that was reminiscent of the pay-option loans that helped to create the American financial mess. Borrowers could choose to make payments as if the forint were at 180 to the franc, and continue to do that through 2014. That would leave many with manageable payments, since most of the loans were taken out at exchange rates from 140 to 180 forints to the franc.
The savings from those lower payments would, however, simply be added to the principal of the loan. It was negative amortization, likely to postpone the pain but not alleviate it.
Floyd Norris comments on finance and the economy at nytimes.com/economix.
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Dollars to doughnuts.
In the first quarter of this year, the average weekly wage in the United States increased by 5.2 percent, to $935, compared to the same period last year. But in Peoria County, Ill., workers received an average raise of 18.9 percent, to $944.
That’s according to a report released Thursday by the Bureau of Labor Statistics on employment and pay for the 322 largest counties.
Source: Bureau of Labor Statistics
The county with the biggest cut in average weekly wages was Williamson County, Tex., where wages fell 3.8 percent, to $953.
In raw dollar figures, New York County (Manhattan) once again had the highest average weekly wage, at $2,634, and the biggest raise, at $222 (9.2 percent).
The county with the biggest increase in employment was also in the Midwest: Elkhart County, Ind., which gained 6.2 percent more jobs over the year, compared to the national average of 1.2 percent job growth. Elkhart County was primarily buoyed by manufacturing, which added 5,125 jobs over the year (12.4 percent).
Source: Bureau of Labor Statistics
On the other hand, Sacramento County, Calif., lost the highest percentage of jobs of all the major counties. Its employment fell by 1.6 percent year over year.
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Initial claims for state unemployment benefits fell 37,000, to 391,000, the Labor Department said, well below economists’ expectations of 420,000. But the department cautioned that the way it adjusted the data for seasonal fluctuations might have overstated the improvement.
Separately, the Commerce Department said the nation’s gross domestic product grew at an annual rate of 1.3 percent in the second quarter instead of the previously reported 1 percent. Consumer spending and export growth were both stronger than estimated.
“When you connect these data points together, they indicate a very tepid recovery. We are still experiencing positive growth, which is better than we feared a few months ago,” said Paul D. Ballew, chief economist at Nationwide in Columbus, Ohio.
The cautious optimism generated by Thursday’s data was tempered somewhat by a report showing that the housing sector remained weak last month.
A survey of chief executives in the United States released on Thursday by the Business Roundtable showed that their views of the economy’s prospects deteriorated in the third quarter, with the number who expected to cut jobs roughly doubling.
The drop in initial claims for unemployment benefits took them below 400,000 for the first time since early August. The department, however, said the labor market’s weakness in recent years might have led the model it uses to seasonally adjust the data to overstate last week’s drop.
The decline also reflected the fading impact of Hurricane Irene, which caused claims to spike in the week ended Sept. 10.
Still, the total number of unemployed continuing to claim benefits after an initial week of aid fell to 3.73 million in the week ended Sept. 17 from 3.75 million a week earlier.
The Sept. 17 week corresponds with the survey period for the Labor Department’s household employment measure, which is used to construct the national unemployment rate.
In August, the jobless rate remained at 9.1 percent, and a separate survey of employers showed that hiring had ground to a halt, which increased recession fears.
Those worries are beginning to fade. Factory output continues to expand and businesses have maintained their appetite for spending on capital goods.
“Indications are that the third quarter is doing better than previously thought. We now anticipate third-quarter real G.D.P. growth of just above 2 percent,” said Nigel Gault, chief United States economist at IHS Global Insight in Lexington, Mass.
Housing, however, remains a weak spot.
The National Association of Realtors said its index of pending home sales, based on contracts signed in August, fell 1.2 percent, to 88.6, its lowest point since April. The association said contract signings, which usually precede actual closings by a month or two, were held back by tight credit and, in the Northeast, Hurricane Irene.
With millions of Americans locked into mortgages worth more than their homes, historically low interest rates are failing to lift sales. Freddie Mac said on Thursday that the average rate on 30-year fixed-rate mortgages fell to a record low of 4.01 percent this week.
Article source: http://www.nytimes.com/2011/09/30/business/economy/second-quarter-gdp-grew-at-1-3-rate.html?partner=rss&emc=rss