March 28, 2024

DealBook: British Regulators Slow to Respond to Libor Scandal, Audit Says

Adair Turner, the chairman of the Financial Services Authority.Andrew Winning/ReutersAdair Turner, the chairman of the Financial Services Authority.

LONDON – British authorities failed to spot interest-rate manipulation by big banks because they were narrowly focused on responding to the financial crisis, according to an internal review by the country’s financial watchdog released on Tuesday.

The audit followed widespread criticism from politicians and some of the banks caught up in the scandal involving benchmark interest rates. Critics said regulators did not respond quickly enough to warnings that employees at certain banks were attempting to alter rates for financial gain.

The review published by the Financial Services Authority, the country’s regulator, said there had not been a major failure of oversight by local authorities, but it added that officials had become too focused on containing the financial crisis to analyze information connected with the potential rate-rigging.

The authority also conceded that it had failed to respond quickly to allegations of so-called lowballing, in which managers altered submissions to the London interbank offered rate, or Libor, to portray their firms in a healthier financial position. The agency added that Libor had been an area of the financial markets that had not received close attention from regulators.

“The F.S.A. did not respond rapidly to clues that lowballing might be occurring,” Adair Turner, chairman of the Financial Services Authority, said in a statement on Tuesday.

Several European banks, including Barclays and UBS, have paid multimillion-dollar fines to American, British and other international regulators related to the continuing investigation into Libor manipulation. Other large firms, including Deutsche Bank and Citigroup, remain under investigation.

The Financial Services Authority’s audit was conducted in response to claims made by politicians and the British bank Barclays that regulators had been informed several times about the potential rate-rigging, but had failed to act.

As part of a major overhaul of the Libor rate, the rate-setting process will come under the oversight of British regulators in April, just as the Financial Services Authority is divided into two separate units as part of a major overhaul of the country’s regulatory regime.

This is not the first time Financial Services Authority has come under fire since the financial crisis began. The agency has also acknowledged partial blame for its role in the bailout of the local lenders Royal Bank of Scotland and Northern Rock.

Article source: http://dealbook.nytimes.com/2013/03/05/audit-faults-british-regulators-response-to-libor-scandal/?partner=rss&emc=rss

Advertising: A National Push Seeks to Separate Sake From Sushi

FOR Americans who drink sake only at Japanese restaurants, the thought of ordering it at a bar or buying it at the supermarket may seem as out of place as using chopsticks to eat Cheerios.

But now Ty Ku, a six-year-old sake brand, is hoping to change that with what it says is a first for any sake brand: nationally televised advertising. Starring CeeLo Green, the singer and record producer who also is a Ty Ku co-owner, the campaign is called “Share on,” a reference to a sake custom of pouring it for others, but not for oneself.

A new commercial opens with a chef at a sushi bar handing a bottle of Ty Ku to Mr. Green, who seems about to hand the bottle to someone off to the right of the screen. A hand reaches in and, as the camera pans to the right, pulls it into another setting, where the hand turns out to belong to a woman in a bathing suit dangling her legs in a pool, Mr. Green at her side. Batonlike, the bottle is handed to other settings where Mr. Green is surrounded by beautiful women, including a nightclub.

“Share with me and I’ll share with you,” Mr. Green says. “Share on.”

The commercial, by Filter Creative Group, a Los Angeles marketing and advertising agency, will be introduced Wednesday on cable networks including AMC, BET and the Food Network. Direction is by Mikael Colombu, with production by Vision Film.

For Ty Ku (rhymes with haiku), which has advertised only in trade publications on a limited basis, the campaign is its first aimed at consumers. Beyond indicating that it will be multimillion-dollar campaign, the brand declined to reveal specific expenditures.

The commercial begins at a sushi bar because “it is the most traditional way to drink sake and what Americans are most familiar with,” said Alan Miller, a co-founder of Filter.

While the primary message of the spot is the conviviality of sharing sake, Mr. Miller continued, the way that it “flows from scene to scene” is meant to demonstrate that sake is as versatile as other alcoholic beverages.

Ty Ku is based in Manhattan, but its sake is brewed in Japan. Andrew Chrisomalis, the chief executive of Ty Ku, said that while the sake itself was “authentic in the most important way, we want to promote a modern approach and spin.”

Americans typically encounter sake served hot in small porcelain cups, or cold in shotlike glasses, which may lend to a misperception that it packs a wallop.

“When people see what looks like a shot glass, they think of something as a harsh whiskey or some other high-proof spirit,” Mr. Chrisomalis said. “But the truth is that sake is brewed much more like beer and is consumed much more like white wine.”

Most Ty Ku sake varieties are 15 percent alcohol by volume, slightly more potent than most wine and slightly less potent than most fortified wines like sherry and Marsala.

In the new commercial, as with most of its marketing material, the brand shows the sake served chilled and in wine glasses, and directs restaurants and bars where it is carried to do likewise.

“It helps relate to you that it’s O.K. to drink four ounces at a time,” Mr. Chrisomalis said.

Ty Ku has a 3.3 percent share of United States sake market, according to Nielsen data cited by the brand. In 2012, it sold about 100,000 cases, equal to what it had sold in the preceding five years combined. Ty Ku projects it will double to 200,000 cases this year.

Such rosy projections are based on recent successes the brand has had with retail distribution. Mr. Green joined other owners to successfully pitch retailers including Target, Kroger and Walgreens, according to Mr. Chrisomalis.

To announce a promotional partnership with Patti Stanger, who stars on “The Millionaire Matchmaker” on Bravo, a 2012 news release from the brand quotes Ms. Stanger, who also became a part owner, as saying, “The Ty Ku sake portfolio is low calorie, gluten-free, sulfite-free and tannin-free, so it fits my healthy lifestyle.”

A 2010 news release announcing a similar equity and promotional partnership with Perez Hilton quotes Mr. Hilton as saying he had switched from vodka to Ty Ku “because these products are low calorie and I can enjoy without guilt!”

And in an appearance on the “Rachael Ray Show” in October, Mr. Green described the brand as “healthy,” and Ms. Ray added with a laugh, “I love feeling good about the cocktail because it makes you feel even better about the second.”

Alcohol Justice, an industry watchdog group, opposes alcohol brands promoting associations with weight loss and wellness. “It’s problematic because there’s a tendency to overindulge in a product when it’s considered low calorie,” said Michael J. Scippa, an Alcohol Justice spokesman. “As long as there’s still alcohol in it, they run the risk of causing health problems rather than solving them.”

With varieties that retail for $17 to $65 for a bottle roughly the size of a .750-liter wine bottle, Ty Ku is poised for what Mr. Chrisomalis called the “premiumization” of the sake category. He cited as a model the way Patrón, introduced in 1989, spurred a trend for premium tequila.

“We want to be the first premium sake call brand,” Mr. Chrisomalis said. “Like someone says, ‘I’ll have a Patrón’ or Jack Daniels, or Johnnie Walker, we want them to say, ‘I’ll have a Ty Ku.’ ”

Article source: http://www.nytimes.com/2013/02/22/business/media/a-national-push-seeks-to-separate-sake-from-sushi.html?partner=rss&emc=rss

Pay Still High at Bailed-Out Firms, Report Says

WASHINGTON – Top executives at firms that received taxpayer bailouts during the financial crisis continue to receive generous government-approved compensation packages, a Treasury watchdog said in a report released on Monday.

The report comes from the special inspector general for the Troubled Asset Relief Program, the bank bailout law passed at the end of the George W. Bush administration. The watchdog, commonly called Sigtarp, found that 68 out of 69 executives at Ally Financial, A.I.G. and General Motors received annual compensation of $1 million or more, with the Treasury’s signoff.

All but one of the top executives at the failed insurer A.I.G. – which required more than $180 billion in emergency taxpayer financing – received pay packages worth more than $2 million. And 16 top executives at the three firms earned combined pay of more than $100 million.

“In 2012, these three TARP companies convinced Treasury to roll back its guidelines by approving multimillion-dollar pay packages, high cash salaries, huge pay raises and removing compensation tied to meeting performance metrics,” Christy Romero, the special inspector general, said in a statement. “Treasury cannot look out for taxpayers’ interests if it continues to rely to a great extent on the pay proposed by companies that have historically pushed back on pay limits.”

The report charges that Treasury has failed to rein in excessive pay at the three firms. It found that Treasury approved all pay raises requested for A.I.G., Ally and General Motors executives last year, with individual compensation increases ranging from $30,000 to $1 million. It also faults the Treasury overseer for allowing pay packages above what comparable executives at other firms receive.

The report also accuses Treasury of failing to follow up earlier recommendations made by the special inspector general. A report issued a year ago made many similar criticisms, arguing that the Treasury officials “could not effectively rein in excessive compensation” because the most “important goal was to get the companies to repay” the government.

“Treasury made no meaningful reform to its processes,” it said in this year’s report. “Lacking criteria and an effective decision-making process, Treasury risks continuing to award executives of bailed-out companies excessive cash compensation without good cause.”

In a response letter included in the report, Patricia Geoghegan, acting special master for Tarp executive compensation, disputed several of its assertions. For one, the compensation packages for A.I.G. and General Motors executives were comparable to those received by executives at other firms, Treasury said. Pay packages at Ally were higher than the median because of “unique circumstances,” it said.

Treasury also noted that the Obama administration had cut pay for executives at bailed-out firms and required that the companies pay top employees with more stock and less cash. Treasury “continues to fulfill its regulatory requirements,” the letter said. It has “limited executive compensation while at the same time keeping compensation at levels that enable the ‘exceptional assistance’ recipients to remain competitive and repay Tarp assistance.”

The Treasury Department is in the process of selling off its remaining shares of General Motors. In December, Treasury sold its final shares in A.I.G., bringing its and the Federal Reserve’s total profit on its investment in the company to nearly $23 billion.

Article source: http://www.nytimes.com/2013/01/29/business/generous-executive-pay-at-bailed-out-companies-treasury-watchdog-says.html?partner=rss&emc=rss

Judge’s Ruling Complicates Enforcement for S.E.C.

Judge Jed S. Rakoff of the Federal District Court in Manhattan added another dimension to that quandary on Monday when he told the Securities and Exchange Commission that he could not determine whether a proposed $285 million penalty against Citigroup was adequate if he did not know what had really happened.

His opinion has undermined the S.E.C.’s longstanding policy of allowing companies to neither admit nor deny the commission’s charges in return for a multimillion-dollar fine and a promise not to do it again.

The commission has “been benefitting for a long time from this huge hammer that allows them to get settlements without having to prove their case,” said Adam C. Pritchard, a University of Michigan law professor. Judge Rakoff’s decision “eliminates that possibility for them.”

Securities law experts say there are ways that the S.E.C. might be able to strengthen its enforcement efforts and make Wall Street fearful of penalties that sting. Jill Gross, a law professor and director of the Investor Rights Clinic at Pace University, said that as a result of the judge’s decision, companies were now likely to have to admit some kind of fault in their settlements.

“It doesn’t need to be a full admission of all culpability,” Ms. Gross said, “but they are going to need some type of admission that something went awry.”

Goldman Sachs did so last year when it settled S.E.C. charges similar to the case against Citigroup that Judge Rakoff rejected. Both firms were charged with selling a mortgage bond investment without telling investors that the people assembling the portfolio were betting that it would drop in value.

In its S.E.C. settlement, Goldman acknowledged that its marketing materials “contained incomplete information,” and that it committed “a mistake” in leaving the full disclosures out of its marketing documents.

“We agree to settlements because they achieve for us largely everything that we could hope to get should we take the case to trial,” Robert Khuzami, the S.E.C.’s enforcement director, said in an interview this month. “I think the message is pretty clear. And the investors get their money much faster, because, as you know, lawsuits can take years.”

Mr. Khuzami said that the “neither admit nor deny” policy was used by the S.E.C. against companies other than Wall Street firms. In addition, he said, other governmental agencies often use the same formulation, and the courts had upheld its application.

The S.E.C. fashioned its “neither admit nor deny” policy in the 1970s, when Wall Street was far different. Most Wall Street firms were relatively small partnerships, meaning that any penalties essentially came out of the pockets of the people who ran them.

Now, however, most Wall Street brokerage houses and investment banks have been joined with publicly traded commercial banks, forming companies so large that penalties of hundreds of millions of dollars are merely “the cost of doing business,” in Judge Rakoff’s words.

The S.E.C. has said that stiffer penalties will provide a greater deterrent. This week, the agency asked Congress to raise the amounts that it can fine companies for securities law violations.

The agency says that it does not have the resources to take many cases to court. The commission said recently that it filed a record 735 enforcement cases in the year ended Sept. 30, producing $2.8 billion in penalties.

Some members of Congress do not buy that argument. “Government resources always will be limited,” said Senator Charles E. Grassley, an Iowa Republican. “That shouldn’t be an excuse.”

S.E.C. officials remain fearful of changing their longstanding policy, however. High-ranking officials at the agency monitored online public commentary after Judge Rakoff’s decision, one agency official said.

“We understand there is a greater public clamoring for accountability for those responsible for the credit crisis,” said the official, who spoke on the condition of anonymity because the Citigroup case was still before the court. “But there are costs with doing away with the policy, and we think they would be pretty significant.”

Article source: http://feeds.nytimes.com/click.phdo?i=48ed5038fb3be8e978b9b939529213e6

Common Sense: Let’s Stop Rewarding Failed C.E.O.’s

So why is H.P. paying Mr. Apotheker more than $13 million in termination benefits?

Just three years after the financial crisis generated widespread public outrage that Wall Street chief executives walked away with hundreds of millions in bonuses and other compensation after driving their companies into insolvency and plunging the nation’s economy into crisis, multimillion-dollar pay for failure is flourishing like never before. H.P. is simply the latest example, albeit an especially egregious one. It’s hard to fault Mr. Apotheker for taking what H.P. offered. But among the many questions shareholders should be asking the board is why it approved an employment agreement for Mr. Apotheker that arguably made it more lucrative for him to fail — and the sooner the better — than to succeed.

“It’s a great irony that spectacular failure is rewarded lavishly,” John J. Donohue, a professor at Stanford law school and the president of the American Law and Economics Association, told me. “It is a terrible mistake to set up a structure where the top person walks away with millions even if the company is laid waste by their poor decision-making, yet this is what’s happening. It’s a shocking departure from capitalist incentives if you lavish riches on the losers.”

He added that it’s especially shocking at H.P., which fired its previous two chief executives before Mr. Apotheker and had to make multimillion-dollar payments as a consequence. “After what H.P. had gone through, you’d think the board would have been on their toes rather than asleep at the switch again,” he said.

Experts said Mr. Apotheker had what amounts these days to a fairly standard termination agreement for a chief executive. In the event he was terminated for “cause,” his contract, a summary of which HP filed as an exhibit to a Securities and Exchange Commission filing, provided a cash payment of twice his base pay (of $1.2 million, or $2.4 million); his earned but unpaid bonus (his “target” bonus was $2.4 million per year); any accrued but unused vacation — and “no further compensation.” That would add up to a maximum of about $4.8 million. But he wasn’t fired for cause.

In the rarefied world of high-level executive compensation, “cause” is a term of art that long ago parted company with standard usage. “Cause is a foreign concept to the general public, at least when it appears in executive employment contracts,” observed Mike Delikat, head of the global employment practice at Orrick Herrington Sutcliffe, who said he’d litigated many such provisions on behalf of major companies. “Most people are employed at will, which means they can be fired any time and for any reason unless the reason is an unlawful one like discrimination. But ‘cause’ is a negotiated term. It is often very narrow, limited to things like conviction of a felony or a complete failure to perform material duties under the contract.”

Mr. Apotheker’s contract wasn’t quite so narrow (“I’ve seen worse,” said Mr. Delikat). But it did narrowly construe “cause” to mean only “material neglect” of his duties or “conduct” that he “knew or should have known is materially inconsistent with the best interest of, or is materially injurious to, H.P.” While such clauses may be open to interpretation, the board appears to have given no consideration to firing Mr. Apotheker for cause, which might be difficult to establish considering the board backed his various strategic initiatives, however ill-fated they proved to be.

Once Mr. Apotheker was being terminated “without cause,” a clause in his agreement kicked in that accelerated the grant of 200,000 shares of “sign on equity grants” and another 76,000 restricted shares and 608,000 “performance-based restricted units” as “long term incentives.” You’d think that long-term incentives would no longer be necessary or appropriate for someone who’d just been fired, and that anything “performance based” would be rendered moot by the plunge in H.P.’s stock price during Mr. Apotheker’s tenure. On the contrary. Thanks to his termination, “all restrictions shall be released” on the grants of restricted stocks, and the supposedly performance-based awards would assume that he was employed “through the end of the performance period,” according to his contract summary.

Article source: http://feeds.nytimes.com/click.phdo?i=da6302ef0fdb9e6c7de405f57bbec1dd

Advertising: Fashion Week Includes Marketers on 4 Wheels

Plastered with logos — and offering free food, cosmetics samples or mini-makeovers — cars and trucks sponsored by brands have become almost as ubiquitous during the past week’s events as five-inch heels.

The car craze reflects the newest tactic in the years-old tradition of guerrilla marketing, where brands try to grab attention during a big event without paying for official sponsorships.

Why cars? Something that can move around is a little easier to get away with as official sponsors and event sites turn aggressive about protecting their turf. And it can be a lot cheaper than ponying up for a sponsorship, or paying to rent and transform a fixed location.

“For companies that we’ve worked with that do multimillion-dollar sponsorship events, there’s a lot of thought that goes into controlling against ambush marketing,” said Linda Goldstein, chairwoman of the advertising, marketing and media practice at the law firm Manatt, Phelps Phillips.

“Sponsors are increasingly demanding of the property owners that they provide protections against ambush or guerrilla marketers,” Ms. Goldstein said. “Here, you’re in public streets so it would be more difficult to prevent. You can’t police all the highways.”

Last week’s Fashion’s Night Out brought a fleet of trucks and cars from brands that didn’t want to be tied to a specific store location. A Manolo Blahnik truck offered milkshakes, and a Vera Wang truck handed out ice cream and samples. While it used a vintage ice cream truck, the nail-polish brand Color Club offered a range of its colors rather than the dairy treat. The French skincare company Votre Vu went one bigger and used an Airstream to carry French can-can girls and a contortionist as it promoted its products.

Cars at Fashion Week include one with a giant golden hairspray can on top of it, from L’Oréal’s Elnett brand. Band-Aid and the designer Cynthia Rowley sponsored a “Glambulance” where passers-by can get custom designed bandages, along with a makeup or hair touch-up.

The makeup company Urban Decay was handing out special flavors of Eddie’s Pizza from its spot at the edge of Lincoln Center, including slices that reflect its makeup palettes, like “The Naked” and “The Smokey.” Asked if the stereotypical weight-conscious fashion editor would indulge in pizza over lunch, Wende Zomnir, the founding partner and executive creative director of Urban Decay, said she was hopeful.

“It’s Eddie’s, so it’s kind of low calorie but super-high-flavor pizza,” she said.

Ms. Zomnir said the truck set her brand apart from other makeup companies involved in Fashion Week. “We view ourselves as an edgy brand, so we’re always looking to do unique things — we didn’t want to just throw stuff in a goodie bag,” she said. “It’s a food-truck moment. It seems relevant and edgy and modern.”

“It was our way to get in people’s faces, be a part of Fashion Week and engage people because we’re feeding them lunch,” she said. “To be honest, we’re not MAC or Maybelline. We’re a good-size brand now, but we’re not a behemoth, so it’s a great way for us to stay true to who we are, and we’re still talking to our customers in a grass-roots way.”

L’Oréal has taken its Elnett car to the Fashion Week sites, but has also been going to touristy areas like Times Square as the runway shows take place, said Nathalie Kristo, senior vice president for marketing at L’Oréal Paris USA.

“It will appeal to fashionistas and women that love to style their hair and that are inspired by Fashion Week, but it’s also targeted to the mass public. That’s why we wanted to go to some places that have high traffic,” Ms. Kristo said.

Like Urban Decay, L’Oréal intends to get people interacting with the brand, not just getting samples.

“What was really important with this initiative was to allow consumers to touch and feel this brand. This is a really unique hairspray, and to give them the idea to engage with the product, and try it, is really what was behind this initiative,” she said. Visitors to the truck can meet L’Oréal stylists, use the product and get hairstyling tips, along with a sample and a coupon.

And because even a car with a hairspray bottle on top is still a car, L’Oréal does not have to get any permits or approvals to park the car. “I haven’t heard of any difficulties we have had parking outside of those venues,” Ms. Kristo said. “It’s actually fairly easy.”

Marketing experts said that despite the ease of guerrilla marketing with the vehicles, official sponsorships still made sense for some brands.

“Being on the outside is good for challenger brands, for sure, but for category leaders, being on the inside still has a much different value,” said Tom Lindell, managing director of Exponent PR, a public relations firm that has worked on Fashion Week events. “If you’re trying to target the people who attend Fashion Week, I don’t know that you can do it very well even on the outside.”

Ideeli, a flash-sale site that is an official sponsor, said it wanted the imprimatur of the official role.

“We thought doing it within the context of Fashion Week was a way for us to support brand partners in general and the fashion community at large,” said David Manela, senior vice president for strategic marketing at Ideeli.

“I’m not disturbed. I can understand that if your objectives are different, then it may be more or less annoying,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=60c84c5f21d92917d4051795222a72c0

DealBook: S.E.C. Adopts Its Revised Rules for Whistle-Blowers

Kathleen L. Casey, above, and Troy A. Paredes, the S.E.C.’s two Republican commissioners, voted against the rules.Joshua Roberts/Bloomberg NewsKathleen L. Casey and Troy A. Paredes, the S.E.C.’s two Republican commissioners, voted against the whistle-blower rules.
Astrid Riecken/Bloomberg News

7:52 p.m. | Updated

WASHINGTON — A divided Securities and Exchange Commission narrowly approved rules on Wednesday to create a $300 million whistle-blower program.

Supporters of the program said it would help the agency crack down on wrongdoing, but opponents contend it would actually hamper the ability of companies to police themselves.

The final rules, which were approved by a 3-to-2 vote, included several changes from rules first proposed by the S.E.C. last year after passage of the Dodd-Frank regulatory law that provided for the program. One of the changes included a potential bonus if corporate employees first report suspected wrongdoing through their company’s internal compliance system.

Business groups worried that bypassing internal reporting procedures would undercut the multimillion-dollar investments they have made to strengthen their compliance departments in response to tougher post-Enron corporate rules and laws, including the Sarbanes-Oxley Act.

But the new rules still drew complaints as opponents contended that the program would still require a whistle-blower to report wrongdoing to the S.E.C. as well as to a company’s internal systems in order to guarantee eligibility for a reward.

Mary L. Schapiro, the S.E.C. chairwoman, said the rules were important to the agency because it has limited resources and therefore needs “to be able to leverage the resources of people who may have first-hand information about potential violations.”

The whistle-blower provisions were written partly in response to the agency’s failure to uncover Bernard L. Madoff’s Ponzi scheme and other similar frauds.

Previously, the S.E.C. had authority to reward tipsters only in insider trading cases and was limited to paying 10 percent of the penalties collected.

The new rules provide for payment of 10 percent to 30 percent of the collected amount when the sanctions imposed by regulators exceed $1 million. In determining the size of the reward, the agency can take into account the value of the tips offered and a whistle-blower’s cooperation with the company’s internal notice program.

The changes from the original proposals, which attracted 240 comments and more than 1,300 form letters, were not enough for the S.E.C.’s two Republican commissioners, Kathleen L. Casey and Troy A. Paredes, who both voted against the rules.

“The final rule permits a whistle-blower to knowingly bypass a company’s good-faith attempts to identify and investigate alleged violations,” Mr. Paredes said, and does not require the S.E.C. to reward an employee for first going to his employer with a tip. Rather, the rule says the agency “may increase” the reward based on that cooperation.

Ms. Casey noted that companies could usually investigate wrongdoing far more quickly than the S.E.C., and that by giving tipsters an incentive to go to the commission, frauds could be allowed to grow worse because of the slower response.

The new program also “significantly overestimates our capacity to effectively triage and manage whistle-blower complaints,” Ms. Casey said. Predicting that the number of complaints flowing into the S.E.C. will grow “as we begin writing some very large checks,” Ms. Casey said “too little has been done here to anticipate” that result.

Robert Khuzami, the S.E.C.’s director of enforcement, said the S.E.C. had seen “an uptick” in the number of complaints since the Dodd-Frank Act went into effect last July, but there had not been a flood. The quality of the tips has improved as well, he said, and they are often accompanied with detailed corroboration.

Sean McKessy, the chief of the S.E.C.’s new whistle-blower office, said the agency’s ability to separate out credible tips also will be enhanced by requirements that potential whistle-blowers identify themselves as seeking a possible reward, and providing a sworn statement, under penalty of perjury, that the information is true.

The United States Chamber of Commerce, which lobbied against the proposed rules, expressed continued dismay. “We have already seen trial lawyers running advertisements and training seminars on how to profit from bounty programs adopted under these rules,” the chamber said in a statement. The new rule will lead lawyers to urge whistle-blowers to keep their company in the dark, it said.

That statement, however, appears not to take into account provisions that allow the S.E.C. to increase a bounty if a whistle-blower notified a company’s compliance program first.

Erika A. Kelton, a lawyer with Phillips Cohen in Washington, said that in more than two decades representing whistle-blowers, her firm has found that “in almost all cases, employees have reported their concerns about misconduct and fraud to managers and supervisors first.”

“It has only been after they have been retaliated against for doing so that they have come to us,” Ms. Kelton added.

The rules also exclude certain people from being eligible for the awards, including people involved in the wrongdoing, lawyers who gain privileged information from clients, foreign government officials and compliance and internal audit employees.

There are exceptions, however. Compliance and internal audit workers or public accountants, who see that a company has not acted on tips of wrongdoing, could be eligible, as could an informant who believes that a company is trying to obstruct an investigation.

Article source: http://feeds.nytimes.com/click.phdo?i=23f2fe3a5cdf10a10db3f8a257d05020

Squinkies Maker Savors Demand for Holiday’s Hot Toy

With the help of “mommy bloggers” and a tepid economy, Mr. Nichols turned the squishy toys, named Squinkies, into a fad. Walmart.com has been sold out of them for more than a week, and stores nationwide are sold out or limiting how many Squinkies each person can buy. Like Beanie Babies or Zhu Zhu Pets, the toys are collectible — the hundreds of characters include a Lhasa apso dog and a tiny bride — but they are much cheaper, selling for $10 for a 16-pack.

“Demand is tight,” said Laura Phillips, senior vice president for toys and seasonal merchandising at Wal-Mart. “Mom doesn’t feel bad — ‘I can get into it and my child can really enjoy it,’ ” she said. “Absolutely that matters in this economy.”

And children cannot seem to resist scooping up the latest toys, which come in plastic bubbles, as a vending machine would dispense, or pronouncing the Squinkies name with glee. (Mr. Nichols described it as made up, but one that was “fun, memorable and came off the tongue easy.”)

Mr. Nichols’s toy story has defied the odds at a tough time for small manufacturers. His company, Blip Toys, is a 16-person operation in Minnetonka, Minn. It faces competition from giants like Mattel and Hasbro with multimillion-dollar advertising budgets. Big retailers, like Toys “R” Us, Target and Wal-Mart, all want exclusive toys to offer. Independent retailers who might take a chance on smaller manufacturers have all but disappeared.

It is also a dicey time for simple toys, often overshadowed during the holidays by games and gadgets featuring the latest technology. A best-selling toy these days has to reflect market research, sell at a certain price and spur interest from customers even before it is on shelves. But Mr. Nichols seems to have a hit on his hands.

“They hit the sweet spot for what’s hot in girls these days,” said Gerrick Johnson, an analyst at BMO Capital Markets.

Squinkies are sold out or on back order at many stores, and Mr. Nichols is busily expanding the line, with sets for boys based on characters like Spider-Man and new dolls based on Barbie and Hello Kitty.

Mr. Nichols began by walking through stores, finding an opening in what’s known as the small-doll aisle, where My Little Pony and Littlest Pet Shop had reigned for years. “All of those brands have been there for a long time, and there’s not a lot of innovation,” he said.

In the eight years since he founded Blip Toys, Mr. Nichols has had enough success with novelty items that he can get meetings with Target, Toys “R” Us and Wal-Mart. From Wal-Mart, he heard that vending-machine concepts were popular in its Japanese division, Seiyu.

Mr. Nichols researched the size of the industry. Vending machines sold billions of dollars of goods a year. That prompted the idea for the toys, squishy rubber characters about the size of a knuckle that come in plastic bubbles.

Kids can also buy play sets, like one that resembles a gumball machine, and insert plastic coins to dispense Squinkies. “Kids are seeing this every day, when they’re walking into every mall they go to,” he said. “There’s no learning curve.”

Though he was aiming for an affordable toy, he also wanted to make them collectible, like last year’s hit toy, the plush hamsters called Zhu Zhu Pets. Blip created hundreds of characters, and each package of Squinkies includes at least four characters. “With one purchase, the child will become an instant collector,” he said.

Mr. Johnson, the toy analyst, said that was smart. “You’re creating a reason for kids to go out and buy more,” he said.

Mr. Nichols presented his ideas to the three major toy retailers last December. Rather than having a toy sculptor create samples, he had a factory in China produce and spray-paint the dolls, to prove that this could be done at a low price. Asked if Wal-Mart executives thought it could be done well at the small scale, “we didn’t,” said Ms. Phillips, the Wal-Mart executive in charge of toys. “But he really worked hard on the execution.”

The retailers liked the Squinkies well enough. “The orders were good, but nothing like what we anticipated this could be,” Mr. Nichols said.

He knew the retailers would test it in August. To pique interest before Squinkies were even on sale anywhere, he reached out to more than 300 bloggers, sending them products for review and giveaways.

Anne McGowan, who runs the blog DealWiseMommy.net, said her son and her nieces understood what the toy was right away, from playing with vending machines in restaurants. And she was relieved at the low price. “That’s one of the best things about the toy: they’re not very expensive,” Ms. McGowan said.

In Waterloo, Ont., Erica Kloetstra, who runs BassGiraffe.com, said the collectible angle pulled in her 4-year-old daughter. “She’s like ‘Now we have to get this, and this, and that.’ That’s why we have so many,” she said.

While tiny toys can be choking hazards, the retailers and Blip emphasize that the toys are for children age 4 and up. And bloggers noted the same. “Due to the small size, my son (which is 2) has placed them in his mouth,” Amanda Blake, who runs FairyGoodMommy.com, wrote, saying that her older daughter now plays with them in her own room. “I do not recommend anyone under the age listed on the package to play with them or have them lying around.”

“Mommy bloggers are incredibly powerful,” said Ms. Phillips of Wal-Mart, in part because they explain to their readers what a toy does or what age it’s appropriate for. “Just getting customers aware of what they are, how do they work, what do I do with them” is quite helpful, Ms. Phillips said.

When the toy hit shelves in August, “the read was fantastic,” she said.

At Target, “we reacted quickly to meet that ongoing demand,” Casey Carl, who oversees toys and sporting goods for Target, said in an e-mail. Target even created a special in-store display to highlight the Squinkies.

“The initial sales came in so far above plan, it was just amazing,” said Mr. Nichols, who declined to specify how many Squinkies had sold over all. The retailers all raised their orders. But, with a 60-day turnaround, Mr. Nichols couldn’t get the product back in stock quickly enough. As Black Friday approached, Squinkies reached the hot toy list at Toys “R” Us, and they were nominated for the Toy of the Year Awards. Retailers were using expensive air freight to ship the toys in time for Black Friday.

Mr. Nichols said he was rushing Squinkies to stores to ride this holiday wave while it lasted.

“Kids move on very quickly,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=e38cb3a9e095ee40c10da09c39a296b4