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Your Money: Credit Bureaus Willing to Tolerate Errors, Experts Say

August 2, 2013 by

That indifference should surprise no one who has ever tried to deal with the any of the three big credit reporting agencies, Equifax, TransUnion and Experian. “You feel trapped, like you are in a box,” said Ms. Miller, a 57-year-old nurse who works in a dermatologist’s office. “You have no control over this, and you can’t call them up and say, ‘You’re fired.’ ”

So she tried suing. That worked. A jury in Federal District Court in Portland, Ore., last week awarded her a whopping $18.4 million in punitive damages, which, according to consumer lawyers, is the largest individual case on record.

If you think this has taught Equifax and the other credit reporting companies a lesson, you are a lot more optimistic than close observers of the industry. They say that despite the huge judgment, little is going to change for the millions of Americans who discover errors in their credit reports.

The credit bureaus are willing to tolerate these errors — and settle with consumers out of court — as a cost of doing business, according to credit experts and lawyers who work on these cases.

“Their business model is to keep doing the same thing over and over again,” said Justin Baxter, the lead lawyer on Ms. Miller’s case. “They can buy off a number of consumers with small dollar amounts and get rid of the vast majority of cases. To Equifax, that’s the cost of doing business.”

Ms. Miller made every effort to fix her report, exactly as consumers are advised to do. She initiated the company’s dispute process about seven times, and in most instances, Equifax would spit back a form letter saying it need more proof of her identity. So she sent her pay stub and her phone bill. When that didn’t work, she sent her pay stub and her driver’s license. And when that failed, she sent her W-2 form and an insurance bill — at least three times.

But nothing ever changed: Ms. Miller, a model financial citizen who once had the credit score to prove it, had become mixed up with another, much less creditworthy Julie Miller. After she was denied a line of credit from KeyBank, she discovered 38 collection accounts on her credit report, none of which belonged to her, along with an inaccurate Social Security number and birth date. Her financial life was no longer her own.

Mixed files, as they are known in the credit industry, most frequently involve people who share common names with individuals who have similar Social Security numbers, birth dates or addresses. But these errors are notorious for being among the most difficult to fix, credit experts said, and require human intervention to untangle the mess. But given the huge number of disputes, the process to address them is largely automated. And that is the excuse the industry advances to consumers who get stuck in its web.

The bureaus often outsource thousands of disputes daily to workers overseas. Those workers, often overwhelmed by the sheer volume of cases, are largely told to translate the problem into a two- or three-digit code that defines the gist of the problem (account not his/hers, for instance) and feed it into a computer.

But that process won’t untangle a mixed credit report. The reason files become mixed to begin with can be traced back to the computer formula the bureaus use to match credit data to a specific person’s credit report. It allows credit data, say a late payment on a credit card, to be inserted into a person’s file even if the identifying information isn’t an exact match. In other words, the system might add a late payment to the credit report of someone like Julie Miller even if the Social Security number is off by two digits or a birth date is off by two years, but enough of the other identifying information matches. That’s roughly what happened to Ms. Miller.

Partial matches aren’t always wrong, of course. Solid estimates on the number of mixed files are hard to find, though a 2004 study from the Federal Trade Commission said that partial matches occurred in about 1 to 2 percent of credit files, citing data from the bureaus. That might not sound like much, but when you consider that there are 200 million individuals with credit files at each of the big three bureaus, that translates to two million to four million consumers.

Article source: http://www.nytimes.com/2013/08/03/your-money/credit-scores/credit-bureaus-willing-to-tolerate-errors-experts-say.html?partner=rss&emc=rss

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Apple Negotiator Defends Tactics in E-Book Trial

June 13, 2013 by Leave a Comment

The executive, Eddy Cue, Apple’s lead negotiator with the publishers, said he was determined to close deals that would allow them to sell their e-books on Apple’s iBookstore in time for the introduction of the iPad in early 2010.

“I wanted to be able to get that done in time for that because it was really important to him,” Mr. Cue said, referring to Mr. Jobs. He was testifying in Federal District Court in Manhattan in the civil antitrust trial brought against Apple by the Justice Department.

“I pride myself on being successful, but this had extra meaning to me,” Mr. Cue added.

Those sped-up negotiations attracted the attention of the government, which filed a lawsuit against Apple and five publishers in April 2012. Mr. Jobs, the co-founder of Apple, died of cancer in October 2011.

Mr. Cue, the highest-ranking Apple executive to take the stand so far in a trial that began almost two weeks ago, mounted a vigorous defense of Apple, which is accused of colluding with the publishers to fix e-book prices.

Through a nearly full day of testimony on Thursday, Mr. Cue denied that he had encouraged publishers to impose a new business model on other retailers, including Amazon.com. Shown a slide displaying what the government has repeatedly called a “spider web” of communications among the publishing executives, Mr. Cue said he did not know that the executives, from publishers including the Penguin Group USA and Simon Schuster, were talking to one another during their negotiations with him.

“I struggled and fought with them,” he said. “If they were talking to each other, I believe I would have had a much easier time getting those deals done.”

But he also revealed details of an unusually long and close working relationship between him and Mr. Jobs.

Mr. Cue, Apple’s senior vice president for Internet software and services, said he spoke or e-mailed with Mr. Jobs at nearly every step of the negotiations, once calling him on his way to the airport as he left a round of talks with publishers in New York.

In one e-mail, Mr. Jobs questioned Mr. Cue about the fledgling iBookstore. “Are we going to let anyone self-publish? Does Amazon?” he wrote.

“Yes and yes,” Mr. Cue replied.

After publishers signed agreements with Apple, shocking the publishing industry, Mr. Jobs e-mailed Mr. Cue: “Wow, we have really lit the fuse on a powder keg.”

The focus of the government’s questioning turned to December 2009 and January 2010, when Mr. Cue repeatedly flew to New York, met with publishers and tried to reach deals to make their e-books available in the iBookstore on the soon-to-be-unveiled iPad.

For publishers, the appeal of Apple getting into the e-book market was enormous. Amazon, which had introduced its Kindle e-reader in 2007, commanded a 90 percent share of e-book sales at the time. But the default price for newly released and best-selling books on Amazon.com was $9.99, a paltry sum in the publishers’ eyes and one that undermined the value of the authors’ work and cannibalized hardcover sales.

Apple encouraged publishers to switch to a so-called agency model, in which the publishers set the price of a book and the retailer takes a commission. Previously, e-books had been sold on a wholesale model, where the retailer pays the publisher about half the list price, then is free to set another price. The agency model prevented Amazon from sharply discounting the books.

Five publishers — the Penguin Group USA, the Hachette Book Group, Simon Schuster, HarperCollins and Macmillan — have already settled with the government. But Apple, intent on protecting Mr. Jobs’s legacy, is fighting the charges in a nonjury trial that was expected to last several weeks.

The defense was questioning Mr. Cue when the day ended and he will return to the stand when the trial continues on Monday.

Lawrence Buterman, a lawyer for the Justice Department, occasionally raised his voice while he questioned Mr. Cue for several hours before a packed courtroom presided over by Judge Denise L. Cote.

“Isn’t it true, sir, that throughout your negotiations with the publishers, that you constantly pitched the deal that you were proposing as a way for them to change the entire e-books market?” Mr. Buterman said.

“No, that is not true,” Mr. Cue said.

Mr. Buterman asked Mr. Cue about a previous statement by David Shanks, the chief executive of the Penguin Group USA, that Penguin would only sign a deal with Apple if three other major publishers had done so first.

“Did that strike you as a little bit like, ‘I’m only doing this deal if my competitors do it?’ “ Mr. Buterman said.

“It’s not unusual,” Mr. Cue said. “Nobody likes to be the first to sign. Everybody thinks that you get a better deal by signing last.”

According to Mr. Cue, Apple approached the negotiations with publishers the same way it did with record companies and other content providers in the iTunes store.

After Apple and other retailers started selling e-books on the agency model, prices on many best-selling and new books rose to the $12.99 to $14.99 range, infuriating many consumers.

“Who protected them?” Mr. Buterman said.

“I did,” Mr. Cue said.

“By charging them higher prices?” Mr. Buterman said.

Article source: http://www.nytimes.com/2013/06/14/technology/apple-negotiator-defends-tactics-in-e-book-trial.html?partner=rss&emc=rss

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DealBook: Enron’s Skilling Could Get Early Prison Release

April 4, 2013 by Leave a Comment

Jeffrey K. Skilling, left, the former Enron chief executive, and his lawyer, Daniel Petrocelli, after his 2006 trial in Houston.Pat Sullivan/Associated PressJeffrey K. Skilling, left, the former Enron chief executive, and his lawyer, Daniel Petrocelli, after his 2006 trial in Houston.

Jeffrey K. Skilling, the former Enron chief executive serving a 24-year sentence for his role in the energy company’s collapse, could be released from prison early under a possible agreement with the government, according to a notice on the Justice Department’s Web site.

Since his 2006 conviction on charges of securities fraud, conspiracy and insider trading, Mr. Skilling has served jail time in federal prisons in Minnesota and now Colorado. He and his legal team have waged an aggressive appeal, repeatedly seeking to overturn his conviction on various grounds.

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The notice, posted early Thursday, was made to notify victims of Mr. Skilling’s crimes — thousands of former Enron employees and shareholders — of any changes related to a defendant’s sentence.

“The Department of Justice is considering entering into a sentencing agreement with the defendant in this matter,” reads the notice, which was earlier reported on by CNBC. “Such a sentencing agreement could restrict the parties and the Court from recommending, arguing for, or imposing certain sentences or conditions of confinement.”

If the government decides to enter into an agreement to shorten Mr. Skilling’s sentence, it is unclear by how much it would be reduced. And any reduction would require the approval of Judge Sim Lake of Federal District Court in Houston, who presided over Mr. Skilling’s trial. (Kenneth Lay, the company’s chairman, was also found guilty but died just over a month after the trial.)

Mr. Skilling and Mr. Lay became public symbols of executive wrongdoing and financial malfeasance after the tech and telecom boom of the late 1990s turned to bust. Enron was at the center of a wave of corporate accounting scandals that emerged out of the stock market collapse. The executives, along with other prominent businessmen like Bernard Ebbers of WorldCom and John Rigas of Adelphia, were convicted by juries and received lengthy prison terms for, among other crimes, lying to their investors about the health of their companies.

After the Enron and WorldCom collapses in late 2001 punctuated the end of the historic bull market, the Bush White House took an aggressive stance on prosecuting white-collar crime. President Bush, who counted Mr. Lay as a friend and had considered him for a post in his administration, created the Corporate Fraud Task Force, which secured nearly 1,300 corporate fraud convictions, including cases against more than 200 chief executives, company presidents and chief financial officers, according to a 2008 report.

An Enron Task Force was also formed to prosecute crimes specifically connected to the energy company’s bankruptcy. The conviction of Mr. Skilling was one of about 16 that the Justice Department secured against former Enron executives, several of whom cooperated with the government and testified at Mr. Skillilng’s trial.

Mr. Skilling’s appeal gained traction with his argument that the government had relied on a dubious legal theory that Mr. Skilling deprived others of his “honest service.” In 2010, the Supreme Court called the use of the awkwardly written “honest services” law unconstitutionally vague and said his conviction was “flawed.”

But a federal appeals court subsequently ruled that the conviction was not tainted by the use of the theory and said there was “overwhelming evidence” that Mr. Skilling had conspired to commit fraud. Last year, the Supreme Court declined to hear Mr. Skilling’s appeal of the appeals court ruling.

But the federal appeals court also reiterated an earlier ruling that Mr. Skilling still needed to have his sentence re-calculated because Judge Lake had erred in his handling of another issue in the case. That re-sentencing was put on hold while the broader appeal wended its way through the courts.

Daniel M. Petrocelli, the lawyer for Mr. Skilling, did not immediately respond to a request for comment.

 

Article source: http://dealbook.nytimes.com/2013/04/04/enrons-skilling-could-get-early-prison-release/?partner=rss&emc=rss

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DealBook: Insider Inquiry at SAC Reaches Into Higher Ranks

March 30, 2013 by Leave a Comment

8:55 p.m. | Updated

Friends of Michael S. Steinberg had always marveled at his good fortune.

In his mid-20s, he landed a job a SAC Capital Advisors, then a small hedge fund owned by Steven A. Cohen, who was fast developing a reputation on Wall Street as a stock trading wizard. As SAC posted stupendous returns year-after-year and became one of the world’s largest hedge funds, Mr. Steinberg earned tens of millions of dollars trading as a close associate of Mr. Cohen, and rose within the firm.

When Mr. Steinberg married at the Plaza Hotel a few years after joining SAC, his boss attended the black-tie affair. Mr. Steinberg and his family moved into an $8 million Park Avenue co-op and summered in the Hamptons. He also gave back, helping found Natan, a philanthropy that promotes Israel and Jewish culture.

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Then, his charmed life came undone.

On Friday, Mr. Steinberg became the most senior SAC employee to be ensnared in the government’s multiyear insider trading investigation. F.B.I. agents showed up at his apartment on the Upper East Side of Manhattan and arrested him in the pre-dawn hours. Just the day before, Mr. Steinberg had returned from a vacation in Florida, where he and his family visited relatives and took a trip to Disney World.

Later on Friday, Mr. Steinberg, 40, in a black V-neck sweater and charcoal-gray slacks, appeared in Federal District Court in Manhattan and pleaded not guilty. Judge Richard J. Sullivan freed him on $3 million bail.

“Michael Steinberg did absolutely nothing wrong,” Barry H. Berke, a lawyer for Mr. Steinberg, said in a statement. “Caught in the cross-fire of aggressive investigations of others, there is no basis for even the slightest blemish on his spotless reputation.”

The arrest was the latest in a whirlwind of activity related to the government’s investigation of SAC. For years, federal agents have been building a case against the fund. This month, SAC agreed to pay $616 million to settle two civil insider trading actions brought by the Securities and Exchange Commission. On Thursday, a federal judge refused to approve the larger settlement of $602 million, raising concerns over a provision that lets SAC avoid an admission of wrongdoing.

Hedge Fund Inquiry

Including Mr. Steinberg, nine current or former SAC employees have been linked to insider trading while at the company; four have pleaded guilty. Some of the former employees who have been implicated hardly knew Mr. Cohen, who operates a sprawling $15 billion fund with more than 1,000 employees across the globe.

But Mr. Cohen and Mr. Steinberg were close. Mr. Steinberg is one of SAC’s most veteran employees, though he was recently placed on leave soon after being tied to an earlier case. He joined SAC shortly after graduating from the University of Wisconsin. When he began at SAC, it was just Mr. Cohen and several dozen traders. For years, he sat near Mr. Cohen on the trading floor in the fund’s headquarters in Stamford, Conn., and he was part of a team of tech-stock traders that posted outsize returns during the dot-com boom and bust. Later, he helped start Sigma Capital, an SAC unit in Midtown Manhattan.

While years apart, the two share the same hometown — Great Neck, N.Y., on Long Island, where both attended Great Neck North High School. They also share a love of art; Mr. Steinberg introduced Mr. Cohen to his childhood friend Sandy Heller, who became Mr. Cohen’s longtime art adviser.

In the past, SAC has distanced itself from former employees charged with insider trading, but on Friday, it issued a statement in support of Mr. Steinberg: “Mike has conducted himself professionally and ethically during his long tenure at the firm. We believe him to be a man of integrity.”

Federal investigators have tried to press lower-level SAC employees for information in helping them build a case against Mr. Cohen. In one instance, F.B.I. agents showed a former trader a sheet of paper with headshots of his former colleagues, with Mr. Cohen at the center. The agents compared the SAC founder to an organized-crime boss who sat atop a corrupt organization.

The pressure on Mr. Cohen, 56, escalated in November, when prosecutors charged Mathew Martoma, a former SAC portfolio manager, with trading in the drug stocks Elan and Wyeth based on confidential drug trial data that a doctor had leaked to him. Mr. Cohen was involved in drug stock trades, but the government has not claimed that he possessed any secret information. Those trades were the subject of the S.E.C. civil action that SAC settled for $602 million. Mr. Martoma has pleaded not guilty and has refused to cooperate with investigators.

Mr. Cohen has not been accused of any wrongdoing and has told his investors that he believes he has acted appropriately at all times.

Amid his legal woes, Mr. Cohen, whose net worth is estimated at about $10 billion, has gone on a shopping binge in recent days, paying $155 million for the Picasso painting “Le Rêve” and $60 million for an oceanfront estate in East Hampton on Long Island.

Mr. Steinberg’s name surfaced last fall, when a former SAC analyst pleaded guilty to being part of an insider-trading ring that illegally traded the technology stocks Dell and Nvidia. As part of his guilty plea, the analyst, Jon Horvath, implicated Mr. Steinberg, saying that he gave the confidential information to Mr. Steinberg and that they traded based on that data. On Friday, federal prosecutors charged Mr. Steinberg with conspiracy and securities fraud, accusing him of participating in the illegal Dell and Nvidia trades. The Securities and Exchange Commission filed a parallel civil lawsuit against Mr. Steinberg.

Last year, a jury convicted two hedge fund managers at other firms related to the Dell and Nvidia trades. E-mails from Mr. Steinberg that emerged in that trial were included in the indictment on Friday.

In one e-mail from August 2008, sent a few days before Dell’s quarterly earnings announcement, Mr. Horvath disclosed secret details about Dell’s financial data to Mr. Steinberg.

Mr. Horvath wrote that he had “a 2nd hand read from someone at the company.” He added, “Please keep to yourself as obviously not well known.”

Mr. Steinberg replied: “Yes normally we would never divulge data like this, so please be discreet.”

In another e-mail from the trial, Mr. Steinberg told Mr. Horvath and another portfolio manager, Gabe Plotkin, about a conversation he had with Mr. Cohen about conflicting views of Dell inside SAC. Mr. Plotkin owned a large Dell position, while Mr. Steinberg was short, meaning that he thought shares of Dell would drop in value.

“Guys, I was talking to Steve about Dell earlier today and he asked me to get the two of you to compare notes before the print” — meaning ahead of the company’s earnings release — “as we are on opposite sides of this one,” Mr. Steinberg wrote.

Since his name surfaced in the investigation, Mr. Steinberg has occasionally spent evenings in New York hotels to avoid being handcuffed at home in front of his two children. Federal agents refused to let Mr. Steinberg surrender of his own volition at F.B.I. headquarters downtown, expressing the view that white-collar defendants should not be given special treatment.

Michael Steinberg entered a plea of not guilty in Federal District Court in Manhattan on Friday and was freed on $3 million bail.John Marshall Mantel for The New York TimesMichael Steinberg entered a plea of not guilty in Federal District Court in Manhattan on Friday and was freed on $3 million bail.

This post has been revised to reflect the following correction:

Correction: March 29, 2013

Because of incorrect information supplied by prosecutors, an earlier version of this article gave the wrong age for Michael Steinberg, the SAC Capital Advisors portfolio manager who was arrested on Friday. He is 40, not 41.

Article source: http://dealbook.nytimes.com/2013/03/29/sac-capital-manager-arrested-on-insider-trading-charges/?partner=rss&emc=rss

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DealBook: Justice Dept. Seeks to Block Merger of Brewers

January 31, 2013 by Leave a Comment

The deal would add Corona to Anheuser-Busch InBev's brands of beer.Carolyn Kaster/Associated PressThe deal would add Corona to Anheuser-Busch InBev’s brands of beer.

The Justice Department sued on Thursday to block Anheuser-Busch InBev’s proposed $20.1 billion deal to buy control of Grupo Modelo of Mexico, arguing that the merger would significantly reduce competition in the American beer market.

The deal, announced last summer, would add Corona Extra to the company’s formidable stable of brands, including Budweiser and Stella Artois.

But the Justice Department said in its lawsuit, filed in Federal District Court in Washington, that allowing the merger to proceed would reduce competition in the beer industry across the country as a whole and in 26 metropolitan areas in particular. The combined company would control about 46 percent of annual sales in the country, the government said, far outpacing Anheuser-Busch InBev’s closest competitor, MillerCoors.

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“If ABI fully owned and controlled Modelo, ABI would be able to increase beer prices to American consumers,” William J. Baer, head of the Justice Department’s antitrust division, said in a statement. “This lawsuit seeks to prevent ABI from eliminating Modelo as an important competitive force in the beer industry.”

The deal is the biggest to be opposed by the Justice Department since 2011, when it sued to block ATT’s proposed $39 billion takeover of T-Mobile USA.

The government’s move is the first significant effort to halt widespread consolidation in the beer industry in some time. Anheuser-Busch InBev itself was the product of a blockbuster merger between two of the world’s biggest brewers, and one of MillerCoors’s parents is the acquisitive SABMiller.

In its complaint, the Justice Department said Modelo had served as a low-price counterbalance to its larger competitors, resisting the price increases Anheuser-Busch InBev has promoted regularly.

In a statement, Anheuser-Busch said, “We remain confident in our position, and we intend to vigorously contest the D.O.J.’s action in federal court.”

Article source: http://dealbook.nytimes.com/2013/01/31/justice-dept-seeks-to-block-anheusers-deal-for-modelo/?partner=rss&emc=rss

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James M. Davis, Top Witness in Stanford Ponzi Trial, Sentenced to 5 Years

January 23, 2013 by Leave a Comment

HOUSTON (AP) — The star prosecution witness at the fraud trial of the Texas financier R. Allen Stanford expressed remorse on Tuesday before being sentenced to five years in prison for helping Mr. Stanford defraud investors out of more than $7 billion in a long-running international Ponzi scheme.

The witness, James M. Davis, had faced up to 30 years in prison after pleading guilty in 2009 to three fraud and conspiracy charges. At Mr. Stanford’s trial last year, Mr. Davis testified that as chief financial officer of Mr. Stanford’s companies he helped the financier falsify his bank’s profits and fabricate documents to hide the fraud.

In a brief statement, Mr. Davis said he would feel remorse and regret for the rest of his life.

“I am ashamed and I’m embarrassed,” Mr. Davis, 64, said at the sentencing hearing in Federal District Court in Houston. “I’ve perverted what was right and I hurt thousands of investors. I betrayed their trust and also associates and neighbors and friends and my family.”

Many of the most compelling details at Mr. Stanford’s trial — including testimony about bribes and blood oaths — came from Mr. Davis, who portrayed his ex-boss as the leader of the fraud who burned through billions of dollars from investors’ certificates of deposits. Mr. Stanford was convicted in March on 13 fraud-related counts and sentenced to 110 years in prison.

A prosecutor, Jason Varnado, had asked for Mr. Davis to get a 10-year prison term. He told Judge David Hittner in Federal District Court in Houston that while Mr. Davis’s cooperation in the case was outstanding, he came to authorities only after Mr. Stanford’s business empire was shut down and he had no other options. Mr. Davis’s sentence should reflect the severity of his crimes, Mr. Varnado said.

“Mr. Davis for 20 years lied and deceived thousands of investors, employees and the public, and helped Allen Stanford commit one of the largest frauds in American history,” he said.

A defense lawyer, David Finn, said Mr. Davis’s cooperation contributed greatly to the government’s efforts to locate and secure funds for investors.

“I’m not here to tell your honor my client was a saint,” Mr. Finn said. “He was remorseful, contrite and tried to make amends for the injuries he’s inflicted.”

Article source: http://www.nytimes.com/2013/01/23/business/james-m-davis-top-witness-in-stanford-ponzi-trial-sentenced-to-5-years.html?partner=rss&emc=rss

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DealBook: Analyst Sentenced to 4 Years in a Turbulent Insider Case

January 16, 2013 by Leave a Comment

For two years, John Kinnucan waged a nasty battle with the Justice Department, mocking F.B.I. agents and threatening prosecutors as they investigated him for insider trading.

On Tuesday, the government secured a victory in its war with Mr. Kinnucan when a judge sentenced him to four years and three months in prison. He appeared in Federal District Court in Manhattan before Judge Deborah A. Batts, who also ordered him to forfeit $164,000 in illegal profits.

“Today’s sentence of John Kinnucan is a fitting conclusion to a criminal odyssey that began with the buying and selling of inside information and evolved into a vile and very public campaign to threaten public servants and obstruct the federal investigation,” said Preet Bharara, the United States attorney in Manhattan, in a statement. “Mr. Kinnucan will now pay for both crimes with his liberty.”

Mr. Kinnucan, 55, who ran Broadband Research in Portland, Ore., pleaded guilty last July to leaking secret information about technology companies to hedge funds. On Tuesday, the once-defiant Mr. Kinnucan expressed remorse. “I’d just like to say I’m sorry to everyone involved for all the trouble I’ve caused,” he said.

The case against Mr. Kinnucan has been among the more bizarre strands of the government’s broad crackdown on criminal activity at hedge funds.

His name first emerged in November 2010, when The Wall Street Journal reported that the F.B.I. had tried to persuade him to record telephone calls with his clients, including SAC Capital Advisors. He rebuffed the request and boasted about his recalcitrance in an e-mail to his hedge fund customers.

“Today two fresh faced eager beavers from the F.B.I. showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information,” the e-mail said. Mr. Kinnucan added that he “declined the young gentleman’s gracious offer to wear a wire and therefore ensnare you in their devious web.”

He then went on something of a publicity campaign, appearing on CNBC and writing a commentary for DealBook titled “Why I Chose Not to Wear a Wire.” In interviews and writings, he argued that he had not violated the law because the information he provided clients was publicly available.

As the investigation wore on, Mr. Kinnucan grew more belligerent. He made nearly 25 threatening telephone calls to F.B.I. agents and prosecutors, many of them laced with repeated references to sexual and other forms of violence, the government said.

“Too bad Hitler’s not around,” Mr. Kinnucan said in one voice message left for a prosecutor. “He’d know what to do with you. You should be in a gas chamber.”

The government charged Mr. Kinnucan last February. He admitted to supplying customers with confidential data about companies including SanDisk and Flextronics. Prosecutors said Mr. Kinnucan had built a deep network of sources at public companies by paying them cash and providing them with illegal tips.

“Insider trading is a serious crime,” Judge Batts said during sentencing, “and obstruction of justice by threatening personally the government authorities who are doing their jobs by investigating and prosecuting insider trading cannot be tolerated.”

Article source: http://dealbook.nytimes.com/2013/01/15/analyst-is-sentenced-to-more-than-4-years-in-insider-case/?partner=rss&emc=rss

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Court Cases Challenge Border Searches of Laptops and Phones

December 4, 2012 by Leave a Comment

The government has historically had broad power to search travelers and their property at the border. But that prerogative is being challenged as more people travel with extensive personal and business information on devices that would typically require a warrant to examine.

Several court cases seek to limit the ability of border agents to search, copy and even seize travelers’ laptops, cameras and phones without suspicion of illegal activity.

“What we are asking is for a court to rule that the government must have a good reason to believe that someone has engaged in wrongdoing before it is allowed to go through their electronic devices,” said Catherine Crump, a lawyer for the American Civil Liberties Union who is representing plaintiffs in two lawsuits challenging digital border searches.

A decision in one of those suits, Abidor v. Napolitano, is expected soon, according to the case manager for Judge Edward R. Korman, who is writing the opinion for the Federal District Court for the Eastern District of New York.

In that case, Pascal Abidor, who is studying for his doctorate in Islamic studies, sued the government after he was handcuffed and detained at the border during an Amtrak trip from Montreal to New York. He was questioned and placed in a cell for several hours. His laptop was searched and kept for 11 days.

According to government data, these types of searches are rare: about 36,000 people are referred to secondary screening by United States Customs and Border Protection daily, and roughly a dozen of those travelers are subject to a search of their electronic devices.

Courts have long held that Fourth Amendment protections against unreasonable searches do not apply at the border, based on the government’s interest in combating crime and terrorism. But Mr. Pascal’s lawsuit and similar cases question whether confiscating a laptop for days or weeks and analyzing its data at another site goes beyond the typical border searches. They also depart from the justification used in other digital searches, possession of child pornography.

“We’re getting more into whether this is targeting political speech,” Ms. Crump said.

In another case the A.C.L.U. is arguing, House v. Napolitano, border officials at Chicago O’Hare Airport confiscated a laptop, camera and USB drive belonging to David House, a computer programmer, and kept his devices for seven weeks.

The lawsuit charges that Mr. House was singled out because of his association with the Bradley Manning Support Network. Pfc. Bradley Manning is a former military intelligence analyst accused of leaking thousands of military and diplomatic documents to the antisecrecy group WikiLeaks.

In March, Judge Denise J. Casper of Federal District Court in Massachusetts denied the government’s motion to dismiss the suit, saying that although the government did not need reasonable suspicion to search someone’s laptop at the border, that power did not strip Mr. House of his First Amendment rights. Legal scholars say this ruling could set the stage for the courts to place some limits on how the government conducts digital searches.

“The District Court basically said you don’t need individualized suspicion to search an electronic device at the border,” said Patrick E. Corbett, a professor of criminal law and procedure at Thomas M. Cooley Law School in Lansing, Mich. “What they were troubled with was the fact that the government held these devices for 49 days.”

Customs and Border Protection, part of the Department of Homeland Security, declined to discuss the policy in an interview, but a spokeswoman for the agency said in an e-mail: “Keeping Americans safe and enforcing our nation’s laws in an increasingly digital world depends on our ability to lawfully screen all materials — electronic or otherwise — entering the United States. We are committed to ensuring the rights and privacies of all people while making certain that D.H.S. can take the lawful actions necessary to secure our borders.”

The statement also referred to the agency’s policy on border searches of electronic devices, which says that officers can keep these devices for a “reasonable period of time,” including at an off-site location, and seek help from other government agencies to decrypt, translate or interpret the information they contain. If travelers choose not to share a password for a device, the government may hold it to find a way to gain access to the data.

Article source: http://www.nytimes.com/2012/12/04/business/court-cases-challenge-border-searches-of-laptops-and-phones.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Bucks Blog: Judge Rules for Employees in 401(k) Fee Case

November 8, 2012 by Leave a Comment

12:16 p.m. Updated / To correct reference to ABB’s fiduciary duty. The company’s fiduciary duty was to act in the best interests of the retirement plan and ABB’s employees–not Fidelity’s employees, as stated in an earlier version of the post.

 

About a year ago, Ron Lieber wrote a Your Money column that described a closely watched case in which employees of a large manufacturing company, ABB Inc., had sued their employer and Fidelity, the manager of its retirement plan, for charging excessive fees.

This spring, a judge for the federal District Court for the Western District of Missouri ruled in the case, finding that ABB had breached its fiduciary duty — meaning that it failed to act in the best interests of the retirement plan and ABB’s employees — in several ways, including a failure to properly track record-keeping fees paid to Fidelity. The court also found that Fidelity breached its fiduciary duty to ABB’s retirement plan by failing to properly allocate interest earned from the overnight investment of plan funds.

The judge, Nanette Laughrey, ordered ABB to pay $35.2 million in damages and Fidelity to pay $1.7 million.

Last week, the judge further ordered ABB and Fidelity to pay $13.4 million in attorney fees and costs. In ordering the payment, Judge Laughrey wrote that “ABB breached its fiduciary duties of both loyalty and prudence to the retirement plans, as a result of which it benefited significantly while plan beneficiaries were deprived of millions of dollars. Fidelity, while less culpable, also took plan assets in violation of its fiduciary duty.”

She said the results of the case “may help benefit other plan beneficiaries, in the event of similar litigation, by further clarifying the duty of loyalty and prudence owed by record keepers and employers.”

In an e-mail, Fidelity said it believed the initial ruling in the case “was in error, and it is being appealed.”

Fidelity also said it disagreed with the court’s finding that Fidelity and ABB should pay attorney’s fees and said it intended to appeal that finding as well, “since the vast majority of the claims against Fidelity were dismissed by the court, as they have been in prior cases.”

Fidelity also said that it provides “valuable services to 401(k) clients for whom Fidelity serves as a record keeper and trustee,” adding, “We believe the fees charged and the compensation collected by Fidelity for those services are reasonable.”

Do you understand the fees your company pays to your retirement plan?

Article source: http://bucks.blogs.nytimes.com/2012/11/07/judge-rules-for-employees-in-401k-fee-case/?partner=rss&emc=rss

Filed Under: Your Money Tagged With: , ,

Arts & Leisure: Richard Prince Lawsuit Focuses on Limits of Appropriation

December 28, 2011 by Leave a Comment

In March a federal district court judge in Manhattan ruled that Mr. Prince — whose career was built on appropriating imagery created by others — broke the law by taking photographs from a book about Rastafarians and using them without permission to create the collages and a series of paintings based on them, which quickly sold for serious money even by today’s gilded art-world standards: almost $2.5 million for one of the works. (“Wow — yeah,” Mr. Prince said when a lawyer asked him under oath in the district court case if that figure was correct.)

The decision, by Judge Deborah A. Batts, set off alarm bells throughout Chelsea and in museums across America that show contemporary art. At the heart of the case, which Mr. Prince is now appealing, is the principle called fair use, a kind of door in the bulwark of copyright protections. It gives artists (or anyone for that matter) the ability to use someone else’s material for certain purposes, especially if the result transforms the thing used — or as Judge Pierre N. Leval described it in an influential 1990 law review article, if the new thing “adds value to the original” so that society as a whole is culturally enriched by it. In the most famous test of the principle, the Supreme Court in 1994 found a fair use by the group 2 Live Crew in its sampling of parts of Roy Orbison’s “Oh Pretty Woman” for the sake of one form of added value, parody.

In the Prince case the notoriously slippery standard for transformation was defined so narrowly that artists and museums warned it would leave the fair-use door barely open, threatening the robust tradition of appropriation that goes back at least to Picasso and underpins much of the art of the last half-century. Several museums, including the Museum of Modern Art and the Metropolitan, rallied to the cause, filing papers supporting Mr. Prince and calling the decision a blow to “the strong public interest in the free flow of creative expression.” Scholars and lawyers on the other side of the debate hailed it instead as a welcome corrective in an art world too long in thrall to the Pictures Generation — artists like Mr. Prince who used appropriation beginning in the 1970s to burrow beneath the surface of media culture.

But if the case has had any effect so far, it has been to drag into the public arena a fundamental truth hovering somewhere just outside the legal debate: that today’s flow of creative expression, riding a tide of billions of instantly accessible digital images and clips, is rapidly becoming so free and recycling so reflexive that it is hard to imagine it being slowed, much less stanched, whatever happens in court. It is a phenomenon that makes Mr. Prince’s artful thefts — those collages in the law firm’s office — look almost Victorian by comparison, and makes the copyright battle and its attendant fears feel as if they are playing out in another era as well, perhaps not Victorian but certainly pre-Internet.

In many ways the art world is a latecomer to the kinds of copyright tensions that have already played out in fields like music and movies, where extensive systems of policing, permission and licensing have evolved. But art lawyers say that legal challenges are now coming at a faster pace, perhaps in part because the art market has become a much bigger business and because of the extent of the borrowing ethos.

Dip almost anywhere into contemporary art over the last couple of years to see the extent. The group show “Free” at the New Museum in 2010 was built partly around the very idea of the borrowing culture, the way the Web is radically reordering the concept of appropriation, with works that “lift, borrow and reframe digital images — not in a rebellious act of stealing or a deconstructive act of critique — but as a way to participate thoughtfully and actively in a culture that is highly circulated, hybridized, internationalized,” as its curator, Lauren Cornell, wrote.

Christian Marclay’s wildly popular video “The Clock” from 2010 was 24 hours of appropriation, made from thousands of stitched-together fragments from films and television shows. Rob Pruitt’s show “Pattern and Degradation” at the Gavin Brown and Maccarone galleries in 2010 lifted designs from Lilly Pulitzer, from Web photo memes and from a couple of T-shirt designers, whose angry supporters staged a flash-mob demonstration to protest the use of the design without attribution.

Mr. Marclay and Mr. Pruitt were both born before the 1980s. But to look at the work of younger artists, especially of those who don’t remember a time before the Web, is to get a true sense of the velocity, and changing nature, of appropriation.

Article source: http://feeds.nytimes.com/click.phdo?i=a47f8c0e85a26171b05d683cf57f82b7

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