February 23, 2024

Former Top Banker Testifies in Spain

MADRID — Rodrigo Rato, a former top banking official in Spain and former managing director of the International Monetary Fund, on Thursday became the most prominent banker to appear in a Spanish court since the start of the country’s financial crisis.

Mr. Rato was called to answer claims that he and fellow directors at Bankia presented misleading accounts for the lender. He testified behind closed doors for nearly three hours and did not make a public statement afterward.

Mr. Rato, the former executive chairman of Bankia, and 32 other former executives and board members were named in a criminal investigation that was ordered this year by a judge from the National Court.

Neither Mr. Rato nor the other executives have been formally charged with any crime. But prosecutors have accused Mr. Rato and the others of presenting inaccurate accounts when Bankia was listed as a public company in July 2011.

In his court appearance, Mr. Rato denied any wrongdoing and instead argued that Bankia was put under pressure to proceed with the stock listing by both the government and the central bank, according to a person familiar with the testimony who requested anonymity because of the confidential nature of the proceedings.

Mr. Rato, who is also a former finance minister, appeared before Parliament in July of this year to answer similar accusations. At the time, he rejected any suggestion that he or other directors had ignored or hidden Bankia’s pile of bad loans.

The government of Prime Minister Mariano Rajoy nationalized Bankia in early May, two days after Mr. Rato resigned from the bank. A month later, after Bankia’s new management announced that the lender needed €19 billion, or $25 billion, in additional capital, Madrid negotiated a €100 billion E.U. rescue package for the country’s troubled banking sector.

That rescue operation is still under way. On Thursday, the European Commission cleared the restructuring plans of four smaller lenders — Banco Mare Nostrum, Caja España-Caja Duero, Caja3 and Liberbank — that were also left with an unsustainable burden of bad property loans after Spain’s construction bubble burst.

The commission has been reviewing the bailouts of the ailing banks to ensure the government aid does not distort competition in the financial sector. As part of the process, the commission has demanded that the banks make significant cuts.

Spanish banks are set to receive €39 billion of the €100 billion authorized. The banks have already received a total of €13 billion of Spanish government aid since 2010 to help them stay afloat.

Shareholders have watched Bankia’s stock price sink since the initial public offering. Many other investors have also incurred losses on preference shares, a type of convertible debt that Bankia and other banks sold mainly to their retail clients. Mr. Rato was confronted by a large group of protesters Thursday, some of whom screamed insults at him as he made his way into the courthouse.

Bankia’s collapse has had political repercussions because the lender has longstanding ties to Mr. Rajoy’s governing Popular Party. Mr. Rato was finance minister in a previous conservative administration, alongside Mr. Rajoy, who was then the interior minister.

Bankia was the product of a merger of seven cajas, or savings banks, that was engineered as part of a government-directed consolidation of the sector.

Bankia’s initial offering had been hailed in Spain as proof that the financial sector could overcome the consequences of a decade of reckless property lending. Instead, Bankia ended up reporting a loss of almost €4.5 billion in the first half of this year, a record for a Spanish bank.

Article source: http://www.nytimes.com/2012/12/21/business/global/former-top-banker-testifies-in-spain.html?partner=rss&emc=rss

DealBook: Deutsche Bank Says Earnings Will Be Weak

Deutsche Bank said Jürgen Fitschen, left, was one focus of a tax evasion inquiry. He is co-chief executive with Anshu Jain, right.Kai Pfaffenbach/ReutersDeutsche Bank said Jürgen Fitschen, left, was one focus of a tax-evasion inquiry. He is co-chief executive with Anshu Jain.

FRANKFURT — Deutsche Bank can’t seem to get a break.

A day after prosecutors raided the company’s headquarters in a tax evasion investigation, Deutsche Bank cautioned that unexpected costs would be a drag on profit. The cost of overhauling a retail banking unit in Germany, coupled with the declining value of some securities, could “have a significant negative impact on the bank’s earnings” in the last three months of the year, the bank said on Thursday.

But Stefan Krause, the bank’s chief financial officer, tried to put the outlook in a more positive light. “This is not seen as a profit warning,” he said in a conference call with analysts. “This is a guidance.”

Mr. Krause also took note of the investigation in the call, but did not address the accusations in detail.

On Wednesday, Deutsche Bank disclosed that Mr. Krause and Jürgen Fitschen, a co-chief executive of the bank, were the focus of an investigation over the value-added tax on the trading of carbon emissions certificates. The inquiry resulted in raids by about 500 police officers, tax inspectors and other officials at the bank’s headquarters in Frankfurt, as well as offices and private homes in Düsseldorf and Berlin. The two executives are subjects of the inquiry because they signed tax return documents.

“The criminal investigation is going on, and it is very difficult to predict when that will be over,” Mr. Krause said.

The bank is dealing with a difficult environment even without pressure from law enforcement authorities.

Like its rivals, Deutsche Bank has been trying to revamp its businesses in the face of a sluggish market and economic weakness. The bank is also moving to reduce risk as new regulations take effect over the next several years. The rules will increase the amount of capital banks must hold against certain kinds of assets.

Deutsche Bank, which is in the midst of closing its books for the year, decided to update investors on the unanticipated costs. Mr. Krause said the bank did not know the amount of those expenses.

“The outcome is still open,” he said. “But there will be quite a large amount of things to consider, which could be substantial and could lead to a loss.”

Some costs relate to an overhaul of Postbank, a Deutsche Bank unit that offers banking services from German post offices. In addition, the bank may need to record losses from debt or other securities that it owns.

The bank announced on Thursday that it would form a new unit focused on winding down investments outside its main businesses. The so-called noncore operations unit will take custody of Deutsche Bank’s holdings of Spanish and Italian bonds, either to sell them or hold them until they mature.

It may be harder for the bank to address the problems with its reputation.

The bank is among the institutions under investigation by the authorities in the United States and Europe over the possible manipulation of benchmark interest rates, like the London interbank offered rate, or Libor. Deutsche Bank said it had set aside money for potential penalties related to the case.

In May, Deutsche Bank agreed to pay $202 million to settle claims by the United States Justice Department that a bank subsidiary had filed false information to qualify for federal mortgage insurance. The bank is also the target of multiple lawsuits in the United States related to its sales of securities linked to the mortgage market.

This post has been revised to reflect the following correction:

Correction: December 13, 2012

An earlier version of this article misstated Stefan Krause’s role at Deutsche Bank. He is the chief financial officer, not the chief executive.

A version of this article appeared in print on 12/14/2012, on page B3 of the NewYork edition with the headline: After Raid, A Warning Of a Drag On Profit.

Article source: http://dealbook.nytimes.com/2012/12/13/deutsche-bank-acknowledges-earnings-will-be-weak/?partner=rss&emc=rss

E.P.A. Finds Hyundai and Kia Overstated Gas Mileage

Because of the inflated mileage, discovered during an audit by the Environmental Protection Agency, the Korean automakers must retrofit the window stickers on the cars, reducing their fuel economy figures by one-to-six miles per gallon depending on the model, the agency said Friday.

“Consumers rely on the window sticker to help make informed choices about the cars they buy,” said Gina McCarthy, assistant administrator of the EPA’s air-quality office. “EPA’s investigation will help protect consumers and ensure a level playing field among automakers.”

The EPA said its inquiry into the errors is continuing, and the agency would not comment when asked if the companies will be fined or if a criminal investigation is under way. But the EPA said it’s the first case in which erroneous test results were uncovered in a large number of vehicles from the same manufacturer. Only two similar errors have been discovered since 2000, and those involved single models.

Hyundai and Kia executives apologized for the errors, said they were unintentional, and promised to pay the owners of 900,000 cars and SUVs for the difference in mileage. The payments, which will be made annually for as long as people own their cars, are likely to cost the companies hundreds of millions of dollars.

Automakers follow EPA procedures to do their own mileage tests, and the EPA enforces accuracy by auditing about 15 percent of vehicles annually.

The EPA said it began looking at Hyundai and Kia when it received a dozen complaints from consumers that the mileage of their 2012 Hyundai Elantra compact cars fell short of numbers on the window stickers. Staffers at the EPA’s vehicle and fuel emission laboratory in Ann Arbor, Mich., included the Elantra in an annual audit that focused on cars that lead their market segments in mileage.

The audit turned up discrepancies between agency test results and data turned in by Hyundai and Kia, the EPA said. As a result, the two automakers will have to knock one or two miles per gallon off the mileage posted on most of the models’ window stickers. Some models will lose three or four miles per gallon, and the Kia Soul, a funky-looking boxy small SUV, will lose six mpg from the highway mileage on its stickers.

Hyundai and Kia are owned by the same company and share factories and research, but they sell different vehicles and market them separately. The companies said the mistakes stemmed from procedural differences between their mileage tests and those performed by the EPA.

“We’re just extremely sorry about these errors,” said John Krafcik, Hyundai’s CEO of American operations. “We’re driven to make this right.”

The changes affect 13 models from the 2011 through 2013 model years, including seven Hyundais and six Kias. Window stickers will have to be changed on some versions of Hyundai’s Elantra, Sonata Hybrid, Accent, Azera, Genesis, Tucson, Veloster and Santa Fe models, as well as the Kia Sorrento, Rio, Soul, Sportage and Optima Hybrid.

Michael Sprague, executive vice president of marketing for Kia Motors America, also apologized and said the companies have a program in place to reimburse customers for the difference between the mileage on the window stickers and the numbers from the EPA tests.

The companies will find out how many miles the cars have been driven, find the mileage difference and calculate how much more fuel the customer used based on average regional fuel prices and combined city-highway mileage. Customers also would get a 15 percent premium for the inconvenience, and the payments would be made with debit cards, Sprague said. The owner of a car in Florida with a one mpg difference who drove 15,000 miles would get would get a debit card for $88.03 that can be refreshed every year as long as the person owns the car, Sprague said.

If all 900,000 owners get cards for $88.03, it would cost the automakers more than $79 million a year.

For information, owners can go to www.hyundaimpginfo.com or www.kiampginfo.com .

Sung Hwan Cho, president of Hyundai’s U.S. technical center in Michigan, said the EPA requires a complex series of tests that are very sensitive and can have variations that are open to interpretation. The companies did the tests as they were making a large number of changes in their cars designed to improve mileage. The changes, such as direct fuel injection into the cylinders around the pistons, further complicated the tests, Cho said.

“This is just a procedural error,” he said. “It is not intended whatsoever.”

Krafcik said the companies have fixed testing procedures and are replacing window stickers on cars in dealer inventories. Owners can be confident in their mileage stickers now, he said, adding that Hyundai will still be among the industry leaders in gas mileage even with the revised window stickers.

The mileage was overstated on about one-third of the Hyundais and Kias sold during the three model years, he said.

Article source: http://www.nytimes.com/aponline/2012/11/02/us/ap-us-hyundai-overstated-gas-mileage.html?partner=rss&emc=rss

Millions May Go to Girl’s Family in Hacking Case

The person said the company, Rupert Murdoch’s News International, had offered about $3.2 million to the Dowler family, with an additional payment of about $1.6 million to go to charity.

The News of the World is believed to have hacked into the voice mails of hundreds, possibly thousands, of people, including celebrities and politicians. Widespread public revulsion resulted from the revelation in July that its victims included the 13-year-old Milly Dowler, who disappeared in 2002 and whose messages were intercepted and erased to make room for new ones even as her family searched for her.

That disclosure ultimately led the Murdochs to close The News of the World, the government to open several inquiries into the matter and the police to expand their criminal investigation into the paper’s conduct.

Mr. Murdoch, who seemed unperturbed by earlier accusations about his employees’ phone hacking, was demonstrably shaken by the news about Milly Dowler. He met with the Dowler family to apologize, and later told a parliamentary committee that he had been humbled by the episode.

News International would not disclose the amounts currently under discussion.

If both parties agree to the proposal, the settlement will be by far the largest to date in the hacking case. In 2008, Gordon Taylor, a soccer executive, received about $1.4 million from News International, the British newspaper arm of Mr. Murdoch’s News Corporation.

Don Van Natta Jr. contributed reporting from Miami.

Article source: http://feeds.nytimes.com/click.phdo?i=4376a9f2f323663db47dee91f67d6eac

Thieves Found Citigroup Site an Easy Entry

Using the Citigroup customer Web site as a gateway to bypass traditional safeguards and impersonate actual credit card holders, a team of sophisticated thieves cracked into the bank’s vast reservoir of personal financial data, until they were detected in a routine check in early May.

That allowed them to capture the names, account numbers, e-mail addresses and transaction histories of more than 200,000 Citi customers, security experts said, revealing for the first time details of one of the most brazen bank hacking attacks in recent years.

The case illustrates the threat posed by the rising demand for private financial information from the world of foreign hackers.

In the Citi breach, the data thieves were able to penetrate the bank’s defenses by first logging on to the site reserved for its credit card customers.

Once inside, they leapfrogged between the accounts of different Citi customers by inserting vari-ous account numbers into a string of text located in the browser’s address bar. The hackers’ code systems automatically repeated this exercise tens of thousands of times — allowing them to capture the confidential private data.

The method is seemingly simple, but the fact that the thieves knew to focus on this particular vulnerability marks the Citigroup attack as especially ingenious, security experts said.

One security expert familiar with the investigation wondered how the hackers could have known to breach security by focusing on the vulnerability in the browser. “It would have been hard to prepare for this type of vulnerability,” he said. The security expert insisted on anonymity because the inquiry was at an early stage.

The financial damage to Citigroup and its customers is not yet clear. Sean Kevelighan, a bank spokesman, declined to comment on the details of the breach, citing the ongoing criminal investigation. In a statement, he said that Citigroup discovered the breach in early May and the problem was “rectified immediately.” He added that the bank had initiated internal fraud alerts and stepped up its account monitoring.

The expertise behind the attack, according to law enforcement officials and security experts, is a sign of what is likely to be a wave of more and more sophisticated breaches by high-tech thieves hungry for credit card numbers and other confidential information.

That is because demand for the data is on the rise. In 2008, the underground market for the data was flooded with more than 360 million stolen personal records, most of them credit and debit files. That compared with 3.8 million records stolen in 2010, according to a report by Verizon and the Secret Service, which investigates credit card fraud along with other law enforcement agencies like the Federal Bureau of Investigation.

Now, as credit cards that were compromised in the vast 2008 thefts expire, thieves are stepping up efforts to find new accounts.

As a result, prices for basic credit card information could rise to several dollars from their current level of only pennies.

“If you think financially motivated breaches are huge now, just wait another year,” said Bryan Sartin, who conducts forensic investigations for Verizon’s consulting arm.

The kind of information the thieves are able to glean is shared in online forums that are a veritable marketplace for criminals. Networks that three years ago numbered several thousands users have expanded to include tens of thousands of hackers.

“These are online bazaars,” said Pablo Martinez, deputy special agent in charge of the Secret Service’s criminal investigation division. “They are growing exponentially and we have seen the entire process become more professional.”

For example, some hackers specialize in prying out customer names, account numbers and other confidential information, Mr. Martinez said. Brokers then sell that information in the Internet bazaars. Criminals use it to impersonate customers and buy merchandise. Finally, “money mules” wire home the profits through outlets like Western Union or MoneyGram.

Riva Richmond contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=cb9d6e842957ea6957994bf51b5de5be