For most baseball players, the right walk-up song — the song that plays as betters approach the plate — is a crucial element to playing the game. Red Sox third baseman Kevin Youkilis likes to have a little fun with his.
Youkilis uses a little play on words as he goes to the plate to Biz Markie’s “Just a Friend,” a song famous for its “Youuuu, you got what I need…” lyric.
That part of the song, of course, is very familiar to the refrain of “Youuuuk” that rains down every time Youkilis takes the plate.
Local car dealer Herb Chambers, has finally brought Youkilis and Biz Markie together. In a new commercial for Chambers’ car dealerships, whose slogan is “We’ve got what you need,” Youkilis and Chambers get a little help from Biz Markie.
Being from the Boston area means you learn handful of facts specific to The Hub.
One of them is that Kevin Youkilis (A.K.A. “The Greek God of Walks,” “Youk”) is a great pro baseball player with a few years left in the tank (despite his 2011 woes).
Another fact is that you can’t throw a stone in New England without hitting a Herb Chambers dealership. As a former resident of the great state of Massachusetts, your author is an Escalade-sized Red Sox fan and also worked a summer shuttling rental cars between two of Herb Chambers’ dealerships.
It seems Chambers and Youk are working together now, but their approach is… unique. Sitting at a piano, the duet attempts to warble out a version of Biz Markie’s classic Just A Friend. Predictably, it’s not exactly Grammy worthy. Hell, it’s not even worthy to make the first round of American Idol auditions. Luckily, Mr. Markie isn’t far away and steps in to help the pair get the song just right.
The message? Herb Chambers has got what you need, thanks to his 48 dealerships located around New England.
Kevin Youkilis, Herb Chambers rewrite Biz Markie hit in new TV spot
Red Sox star Kevin Youkilisis teaming with auto baron Herb Chambers for a hip-hopping new TV commercial with Biz Markie.
The spot launching tomorrow shows Youkilis and Chambers sitting at a piano trying to work out a rendition of Biz Markie’s 1989 hit “Just a Friend.”
Youkilis admits that he’s not “much of a singer” and stumbles through a few more takes with Chambers, Biz Markie jumps in, singing “Youk, you got what I need…”
Sox fans already know that Youkilis uses the tune as his theme song before stepping to the plate at Fenway Park.
The All-Star signed a two-year endorsement deal with Herb Chambers, operator of 45 car dealerships, in May 2010.
The Biz Markie spot, produced by Danvers-based Neal Advertising, will appear on www.wevegotwhatyouneed.com and air on local TV broadcasts starting next week.
Groupon’s most recent financials aren’t looking so hot, which has economists wondering whether the company that started the daily deal deluge might be in trouble. Though the company’s been courted by Google and raised nearly a billion dollars in financing earlier this year, at no point in its existence has Groupon ever made a profit. So the company’s recent decision to remove their Adjusted Consolidated Segment Operating Income (ACSOI) numbers from their financial statements — a measurement of profits before they’re adjusted to factor in subscriber-acquisition costs and stock-based compensation — does not bode well, according to financial analysts.
Vin Vacanti, who runs the (rather addictive) site Yipit.com, looked at the Groupon’s Boston market recently for evidence of this, and saw a tremendous dip in the Groupons sold per subscriber and the revenue earned per merchant. “These two metrics suggest that Groupon’s bottom line is in trouble,” writes Jay Yarow at Business Insider.
Rob Wheeler at the Harvard Business Review goes a step further, questioning not only the business model but Groupon’s raison d’etre in a recent blog post. “Deep down, Groupon knows what we all know: good investments are profitable investments,” he writes. “Groupon’s fundamental problem is that it has not yet discovered a viable business model.” Wheeler argues that a major thing missing from Groupon’s business plan is that their insane focus on growth hasn’t netted an improved experience for the user. The notion of a deal “tipping” is pretty much over, and it doesn’t operate like a social network which only gets better when everyone joins. Not only that, but buying deals doesn’t make life better for the user over time; there’s no incentive structure to keep buying from Groupon, which is a problem as the market gets more and more flooded with copycats.
But with all that money flowing in, who has time to worry about making a profit, right? Not so much. Groupon apparently needs $750 million in it’s IPO to keep the company solvent. Now if someone can come up with a deal site for that, they’d have a pretty impressive business on their hands.
Exxon Mobil said Wednesday it has discovered an estimated 700 million barrels of oil equivalent at a deepwater well off the Louisiana coast, a major find that a top House Republican argued should push the administration to speed up offshore permitting.
“This is one of the largest discoveries in the Gulf of Mexico in the last decade,” Exxon Mobil Exploration Company President Steve Greenlee said in a statement.
Exxon Mobil made the discovery after the Interior Department’s Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) approved an application in March allowing the company to resume exploratory drilling. Drilling at the well was halted in the aftermath of last year’s Gulf of Mexico oil spill.
The well is located about 250 miles south of New Orleans in about 7,000 feet of water, Exxon Mobil said.
House Natural Resources Committee Chairman Doc Hastings (R-Wash.) applauded the discovery Wednesday and argued it shows the Gulf’s potential as a source of domestic oil.
“This is the exact reason why Republicans have been pressuring the Department of the Interior to issue offshore permits—America has abundant oil and natural gas reserves, we simply need to allow the hardworking men and women in the energy industry to do their job,” Hastings said in a statement.
Republicans and drill-state Democrats have alleged that the Obama administration is slow-walking the issuance of Gulf drilling permits. But the administration insists that it is working diligently to approve permits under a new regulatory scheme that includes beefed-up safety and environmental standards.
BOEMRE has approved 15 deepwater permits since February, when the industry was able to show that it can contain well blowouts.
John Keith: Borders DTX is Another Hole in The Ground
The Borders in Downtown Crossing will close soon, victim of its parent company’s bankruptcy.
What should be done with the space?
Borders Books Downtown Crossing - Boston MA
Borders Group, Inc. is in the process of liquidating its holdings, selling off the entire inventory in its 399 bookstores before going out of business forever. Here in Boston, its Back Bay branch is already closed, and last week the Downtown Crossing store advertised a 10 percent closeout sale on books in its fiction collection, with discounts of 20 – 40 percent and more expected soon.
This news could not have come at a worse time for the Downtown Crossing (DTX) neighborhood. With the Filene’s hole in the ground just a block away, with the nearby 45 Province condo project less than a third sold, with the proposed One Bromfield apartment complex preparing to break ground, and with multiple retail vacancies leaving the area feeling at times like a ghost town, the neighborhood needs to at least hold its ground until the real estate market and economy improves. Otherwise, we might lose the opportunity to save our city’s main shopping district for as long as another generation.
The DTX Borders at 10-24 School Street includes 36,000-plus square feet of space with the bookstore on the first two levels (the chain’s largest) and separate business offices on the floors above – it’s a large building in a prominent location. (The building’s owners can’t be happy losing their prime retail tenant, considering they paid $32.6 million for the property back in 2006, taking out a $24.45 million mortgage loan.)
Assessed at $8.4 million by the city of Boston, the property brings in $260,000 per year in taxes. So, it’s in all of our best interests that it doesn’t lie dormant for very long.
One building can’t be counted on to resurrect an entire neighborhood, but unfortunately, the opposite is true – all it takes is the demise of one building to tilt a neighborhood over the edge into urban blight. That’s what’s at risk here.
We need to ensure that, once Borders closes its doors, something else quickly takes its place. The question is: What should the Downtown Crossing Borders become?
I asked my friends on Facebook and Twitter for ideas. Here are their responses, including the clever, the sarcastic, the silly and the sublime.
Beer Garden
International Food Court
Jewelry District
Roller skating rink
Bigger, better hole (see Filene’s)
B&H photo store
Starbucks|FedEx|Kinko’s with cubicles
Full-sized version of Pee-Wee’s Playhouse
Bordello
Redemption center
Movie theater / IMAX
College classrooms
Library (college or public)
Bookstore
Restaurant
Apple store
Performance space
Office space
Open market / flea market
Movie / TV studios
Boston History Museum
Boston Design Museum
Institute of Contemporary Art (ICA) Downtown
IKEA
CVS
Kmart
Bank
A new city hall
Trader Joe’s
Multi-level burrito place
Amazon Kindle store (too soon?)
Six-story winding slide
An ethnic-food sensitive Whole Foods
A newspaper office
Pub with good beer and live music
Reopened Filene’s Basement
All of the above are great ideas (although, with varying degrees of practicality). They show that Boston residents feel engaged and involved, that there are plenty of people who want our downtown neighborhood to improve and our city to succeed.
An out-of-town friend suggested, “They should make DTX more of a promenade-like area with higher-end shops and boutiques, cafés, etc.”
Easier said than done, although many cities have had success with this sort of thing, including Third Street Promenade in Santa Monica and Lincoln Road in South Beach, Miami.
Meanwhile, the Boston Herald came up with the concept of a “Digital Alley”.
There’s precedence for this idea of turning a rundown neighborhood into a digital district. Twitter, the online messaging service, is moving into an abandoned furniture showroom building on San Francisco’s Market Street, occupying hundreds of thousands square feet of space.
SF city officials persuaded Twitter to stay local “by proposing a six-year exemption on the city’s 1.5 percent payroll tax for new employees of companies located in the mid-Market and Tenderloin neighborhoods,” according to SF Gate.
I’ve never been fond of tax credit gimmicks, so I can’t recommend making this kind of offer, here in Boston. It leads to all types of trouble. They’ve already discovered this in San Francisco, where other internet companies are urging officials to make payroll-tax changes “that would benefit companies no matter where they are located in the city,” according to the Wall Street Journal. But, it’s an interesting idea.
Hopefully, Boston’s leadership is paying attention to this dire situation and is willing to put as much effort into Downtown Crossing, a neighborhood that already exists, as it is in the “Innovation District” which, last time I checked, was still a bunch of parking lots.
And, hopefully, our elected officials are willing to help businesses that are already located in Boston as well as companies that have to be persuaded to move here with offers of buckets of cash in return.
If Boston Mayor Thomas M. Menino is going to continue giving our money away to private developers (which seems probable), he could do worse than using it to encourage economic development and growth in a neighborhood such as Downtown Crossing.
What do you think should be put in the Borders’ space? And what thoughts do you have about what’s going on in Downtown Crossing?
BOSTON (MarketWatch ) — It’s no joke. The sky over the investment world and everything under it, including bonds, stocks, money markets, commodities, you name it, will fall unless lawmakers raise the $14.3 trillion Federal debt ceiling by Aug. 2.
It could be nothing less than catastrophic and worse than the financial meltdown of the late 2000s should Uncle Sam fail to raise the legal limit on government borrowing and default on U.S. debt, according to Greg McBride, a CFA charterholder and senior analyst with BankRate.com. “There will be no safe haven,” said McBride, from his perch in Florida.
In a press conference Monday, President Obama called for compromise as party leaders seek to craft a deal that raises the legal limit on how much the U.S. government can borrow while slashing projected deficits over the next decade. Democratic and Republican leaders held talks Sunday, but discussions broke down over taxes.
Obama said he would keep convening with party leaders every day until a debt-limit deal is reached. He also said he would reject a stopgap measure of 180 days or less. Congress has to raise the federal government’s legal debt limit by Aug. 2 or the nation could be in danger of defaulting on its debt, Treasury Secretary Timothy Geithner has said. A U.S. default could put the economy back into recession and create panic in global financial markets.
And the sad part is that most Americans (and lawmakers for that matter) don’t realize just how bad things will get if the U.S. fails to pay any of its obligations, even if it’s the teeniest, tiniest bill.
The crux of the matter, according to BankRate’s McBride, is that people on Main Street don’t understand the connection with, and the unintended consequences of, lawmakers not raising the debt ceiling.
According to McBride, here’s what’s likely to happen should the Obama administration and Congress fail to agree on a plan to raise the debt ceiling and compromise on deficit reductions over the next 10 years. “It’s not an uplifting conversation,” McBride said.
Rapid repricing
First, there will be what McBride calls a “rapid repricing” of all financial assets, not just Treasuries. In other words, the value of your 401(k) plans, IRAs, 529 plans, gold and real estate will all collapse.
And the reason for that is this: What is fundamental to the pricing of financial assets is the notion that U.S. Treasuries are risk-free. All financial assets are priced based on this assumption (or hope). If Treasuries are no longer risk-free, then all financial assets have to be repriced against another a benchmark.
And this time, investors won’t have a safe haven to which they can flock as they did during collapse of 2008. “There will be no place to hide,” said McBride. “Treasuries will no longer be safe in the event of a default.” Ditto real estate, gold, and farm land. In short, there will be no flight to safety because no asset will be safe. “Even cash might not be a safe haven.”
Credit crunch redux
Should Uncle Sam renege on its promises, McBride predicts that interest rates on all forms of debt — mortgages, car loans, government — will spike, resulting in a renewed credit crunch. Borrowing will come to a halt. Business will come to a halt. And even more troubling is the possibility that a halt in the flow of credit will cause commercial paper markets to dry up and that will result in a run on money funds.
Only this time, there won’t be a federal backstop like we had in 2008, said McBride. At the time, the Federal Reserve took action on several levels to support the money markets, and raised the insurance level on deposit accounts to $250,000 per person, per account category, per bank. But what if there was a run on banks? McBride said, “What good is FDIC insurance if the government is not paying its bills?”
If the scenario plays out, even in the case of a brief default, it will permanently tarnish the U.S.’s credit rating and usher in period of permanently higher interest rates. “There will forever be a risk premium attached to U.S. government debt,” said McBride.
Unemployment will rise
According to McBride, Uncle Sam defaulting on its debt could also result in massive job losses as companies slash expenses to conserve cash. And therein lies yet one more reason why lawmakers should do all they can to resolved the debt-ceiling issue. The U.S., which reported last week that unemployment rose to 9.2%, can’t afford any more bad news. “We’re in a bind and we can’t afford to raise the cost of borrowing,” said McBride.
Call, email your representatives
According to McBride, there is no safe place to put your money should Uncle Sam default. And the only good investment move to make right now just might be U.S. postage stamps on envelopes addressed to your representatives in Congress. And inside those envelopes should be requests, no — urgent pleas — asking lawmakers to deal with the debt ceiling now or run the risk of forever changing the landscape of the U.S. as we know it.
Lately, financial education for kids and adults seems to be right up there with Mom and apple pie as a crowd-pleaser.
Nearly everyone acknowledges that financial literacy is a worthy goal, and more than a dozen states require some form of personal-finance education in high schools. There’s just one problem: It doesn’t seem to be working.
That was the sobering conclusion of a panel of experts at a conference on lifecycle saving and investing that I recently attended at Boston University. The problem, the participants agreed, is that broad-based efforts to improve financial literacy don’t hit people when they really need it. The best time to provide financial education, says Annamaria Lusardi, director of the Financial Literacy Center sponsored by the Rand Corp., Dartmouth College and the University of Pennsylvania’s Wharton School, is “when people actually have to make financial decisions.” (At Dartmouth, for example, new employees are given a simple, one-sheet walk-through of the retirement plan during orientation. The handout is then supplemented by short videos that explain such principles as compounding and diversification and offer profiles of real people telling how they save and invest.)
The same is true of personal-finance curricula aimed at kids, says Lewis Mandell, a professor at the University of Washington’s Foster School of Business. After a career specializing in consumer financial behavior, Mandell has concluded that financial education doesn’t have a lasting impact on financial literacy. He ticked off a number of problems: Lessons aren’t “sticky,” to use the Web vernacular. Classes are generally one-offs that aren’t reinforced. And the subject matter isn’t relevant to kids’ immediate experiences — not unlike trigonometry.
Paul Solman, economics correspondent for The PBS NewsHour , noted that a long-term study in New Zealand has shown that adult financial habits can be determined as young as age 3. Children with the least amount of self-control at that age have the most difficulty managing their money as adults.
To improve self-control among kids, the study’s associate director, Terrie Moffitt, of Duke University, recommends — guess what? — giving them an allowance, along with help on how to manage it.
Good advice. All of this was fascinating but not that surprising. In fact, it was encouraging to get academic backup for the real-world advice I’ve been giving for a long time.
For example, it makes sense to me that lessons about life insurance and Social Security wouldn’t be “sticky” for high school students. But sticking them with the responsibility of paying for their own clothing or cell phone does make an impression. That’s why I’ve always been a big advocate of an allowance that’s tied to financial responsibilities (see 7 Tricky kids-and-Money Challenges to Anticipate ).
Based on what I heard at the conference, I’ll stick with some other good advice:
Don’t rush things. Children, like adults, operate on a need-to-know basis, so teach them lessons that are age-appropriate and don’t overwhelm them with information (see 6 Key Questions Before You Teach Kids About Money ).
If you begin an allowance around age 6 or 7, which is a good time to start, keep it simple by giving kids one financial responsibility (perhaps purchasing their favorite collectibles) that you can build on later. Nothing beats a first paycheck for giving teens a crash course in taxes. And high school students may not care much about retirement, but when your college grad gets her first job and has to sign up for the 401 (k) plan, I guarantee you’ll get a phone call asking for help.
Make it fun. In my experience, the best way to get students interested in learning about money is to entertain them. Mandell’s research shows that playing a stock market game is far more efficient at promoting financial literacy than taking a class in personal finance.
In the classroom, I’d also recommend other hands-on games that let kids make real-world decisions about choosing a career, buying a home and paying the bills. And any kind of competition (like a raucous game of financial soccer that I recently witnessed ) gets them pumped and increases the chances that they’ll remember the lesson even after they’ve taken the exam.
NOTHING succeeds like failure, as the saying goes. And nowhere is this dismal truth more evident than in our financial regulatory system, one year after the bankruptcy filing of Lehman Brothers.
Even though calamitous lending practices laid waste to the nation’s economy, surprisingly little has changed about how the financial arena operates and is supervised. Sure, a couple of venerable brokerage firms have vanished, but many of the same players remain on the scene, in the same positions of power.
Senior regulators who stood idly by for years as financial firms built their houses of cards have been rewarded with even bigger jobs or are jockeying for increased responsibilities. The Federal Reserve Board, for example, wants to become the financial system’s uber-regulator, even though its officials did nothing as banks made deadly decisions to lend recklessly and leverage themselves to the max.
Awarding increased power to those who failed in their oversight duties flies in the face of all notions of accountability. Imagine hiring Angelo R. Mozilo, the former chief of Countrywide Financial, to run a global financial institution, or installing E. Stanley O’Neal, who presided over a disastrous period at Merrill Lynch, at the helm of a major investment firm.
Yet those in the public sector ask us to believe that regulators who snoozed during the credit bubble will be alert to emerging problems on their beats when the next mania begins.
That’s asking a lot, isn’t it?
Here’s a novel thought. Instead of creating more regulations to try to prevent this kind of mess from recurring, why not figure out how to hold regulators accountable when they perform as poorly as they did in recent years?
Edward J. Kane, a professor of finance at Boston College and an authority on the ethical and operational aspects of regulatory failure, has some ideas about how to do this and right our damaged system in the process. He outlined them in a recent paper titled “Unmet Duties in Managing Financial Safety Nets.”
This ugly financial episode we’ve all had to live through makes clear, Mr. Kane says, that taxpayers must protect themselves against two things: the corrupting influence of bureaucratic self-interest among regulators and the political clout wielded by the large institutions they are supposed to police. Finally, he argues, taxpayers must demand that the government publicize the costs of efforts taken to save the financial system from itself.
“That authorities and financiers could so callously violate common-law duties of loyalty, competence, and care they owe taxpayers and financial-institution customers is evidence of a massive incentive breakdown in industry and government,” Mr. Kane writes. “This breakdown cannot be repaired merely by replacing the governing political party or by changing the jurisdictions and mission statements of regulatory agencies.”
It’s tough, however, to assign responsibility to regulators who routinely fend off or stymie anyone attempting to scrutinize how the cops on the beat functioned in the years preceding the financial meltdown. So everyday Americans need to kick and scream if they want some light shed on this critical epoch in our financial history.
To bring accountability to regulatory performance, Mr. Kane suggests that financial supervisors take an oath of office in which they agree to perform four duties. First is the duty of vision, under which they would promise to adapt their surveillance practices to respond to the creative ways financial institutions hide their dubious practices. Regulators must also promise to take prompt corrective action, and to perform their work efficiently. Finally, there is what Mr. Kane calls the duty of “conscientious representation,” whereby regulators swear to put the interests of the community ahead of their own.
This last promise gets to the heart of a continued erosion of trust in our system, Mr. Kane argues. “If real world supervisors were perfectly virtuous, they would make themselves politically and financially accountable for the ways in which they exercise their discretion,” he writes. “Perfectly virtuous supervisors would fearlessly bond themselves to disclose enough information about their decision making to allow the community or interested outsiders to determine whether and how badly they neglect, abuse, or mishandle their responsibilities.”
Instead, our regulators refuse to produce complete documentation and accounts of the actions they took during the crisis. And keeping taxpayers in the dark isn’t exemplary ethical behavior. Rather, it is characteristic of what Mr. Kane calls an elitist regulator, one who uses crises to cover up mistakes and expand his or her jurisdiction.
“According to this standard,” Mr. Kane writes, “Fed efforts to use the crisis as a platform for self-congratulation and for securing enlarged systemic-risk authority sidetracks, rather than promotes, effective reform.”
To ensure that regulators live up to the promises they make, Mr. Kane suggests that inspectors general at each agency be charged with regularly auditing the performance of financial overseers. A crucial component of those reviews would be exploring attempts by regulated entities to influence the officials who oversee them. That’s because in financial crises, Mr. Kane explained, crippled institutions pressure the government to rescue them and force other parties (usually the taxpayers) to share their pain.
“We’ve got a very comfortable equilibrium here where Wall Street praises the authorities and the authorities give Wall Street more or less what it wants and they hope that the public really doesn’t understand the depth of the cynicism involved,” Mr. Kane said in an interview. “You keep reading about how wonderful it is that we didn’t have a Great Depression. Well, if they can sell that point of view, then nothing will change.”
The Cambridge office of search engine giant Google Inc. has grown to employ more than 300 people, and now it’s making room for more. The company is recruiting local engineers, advertising managers, and administrative staff — all part of a global hiring spree, the biggest in Google’s history, with plans to hire more than 6,000 workers worldwide this year.
“The Boston area is home to a wealth of talent and we’re excited to continue to grow our presence in the region,” said Brian Schmidt, director of online sales at Google Cambridge.
Already, Google’s employment website lists a host of openings in Cambridge, including software engineers, product managers, advertising account executives, technical support engineers, and even a specialist in hiring new workers. The Google office in Cambridge employs sales personnel for the company’s vast online advertising business. Also on board are engineers who work on the company’s flagship Internet search service, the Android operating system for cellphones and tablet computers, and Google’s network of high-powered computer centers scattered across the globe.
At the end of 2010, Google employed 24,400 people around the world, so the new hires amount to a 25 percent increase in personnel in a single year. According to the company’s official corporate blog, Google plans to recruit workers “across the board.” That covers a lot of territory; apart from the company’s dominant position in online search, Google is involved in a vast array of other businesses. It owns the hugely popular YouTube video site; develops the Android operating system; has launched the Google TV project to combine Internet and television viewing; is building Chrome, a new computer operating system to rival Microsoft Corp.’s Windows; and is developing new social networking products to compete with market leader Facebook. And underneath it all, Google must manage and expand the online advertising business that generated the bulk of its 2010 revenue of $29.3 billion.
Carl Howe, director of consumer research at the Yankee Group in Boston, said that Google will likely concentrate on enhancing its products and advertising services to work better on mobile devices. “They want to capture even more of the five billion consumers who own mobile phones around the world,” said Howe. “Only about a billion and a half people own PCs.”
Google won’t say exactly how many people it is hiring, either locally or worldwide, although the company’s outgoing chief executive, Eric Schmidt, said in Germany on Tuesday that the company will bring on more than 1,000 new workers in Europe this year. But on the Google blog, senior vice president of engineering and research Alan Eustace said hiring this year would exceed the previous peak year of 2007, when Google brought on more than 6,000 new workers. The company’s 2011 hiring plans are a big step up from last year, when Google recruited more than 4,500 new workers worldwide.
BOSTON (TheStreet) — The financial gap between what Americans need for retirement and what they have is $4.6 trillion as a national aggregate and an average $48,000 per person, according to congressional testimony by the Employee Benefit Research Institute.
Jack VanDerhei, EBRI’s research director, was among those testifying at a hearing Thursday, The Wobbly Stool: Retirement (In)security in America, convened by the Senate Committee on Health, Education and Labor. Testimony and video of the hearing on U.S. retirement income adequacy is available online.
EBRI is a research institute based in Washington, D.C., that focuses on retirement and economic security issues. Its analysis estimates how much money will be needed for “basic” expenses (such as food and shelter) and uninsured health care costs in retirement, and what financial resources retirees are likely to have.
The deficit projection assumes no changes to the current Social Security benefit structure. If Social Security benefits were to be eliminated, the aggregate deficit would jump to $8.5 trillion and the average amount would increase to about $89,000.
Ross Eisenbrey, vice president of the Economic Policy Institute, a think tank that analyzes trends in employment and compensation, offered an even more pessimistic view by citing Boston College’s Center for Retirement Research’s estimate that American households ages 32 to 64 have a retirement income deficit of $6.6 trillion. “It is a figure that dwarfs the federal deficit and casts a pall over hopes of them retiring in any kind of comfort,” he said.
A recurring theme of Eisenbrey’s testimony was that, “Congress has made matters worse by focusing retirement policy on high-income households and neglecting low-income workers.”
“While nothing to tout, the financial situation of seniors today might be as good as it will ever get for the typical American,” he said. “Between declining pension coverage and Social Security cuts, it is possible that the next generation to retire will be the first to be worse off than its predecessor.”
Eisenbrey blames, in large part, the shift away from traditional pension plans.
“Most 401(k) participants do not have the financial expertise to manage their investments,” he said. “Many fail to diversify sufficiently and often make poor investment decisions. They tend to have an all-or-nothing approach to risk and, despite the lessons of Enron, many still have funds invested in employer stock. Luck plays an oversized role in whether retirement savings in personal accounts will be adequate. Even 401(k) participants who make relatively conservative investment allocation decisions over a long time horizon are subject to unacceptable risks.”
Eisenbrey urged the Senate committee to “recognize that the retirement income deficit we are leaving for the Gen Xers is at least as serious as the ‘burden of debt for our grandchildren’ that gets so much attention in the media and in political debate.”
“How can it be that after 32 years and trillions in tax subsidies, 401(k)s have worsened, rather than improved, retirement security?” he said. “First and foremost, the design of the 401(k) ensures that its tax subsidies go disproportionately to high-income earners who least need the government’s help in saving, while providing little or nothing to low-income earners, many of whom struggle to meet their daily expenses, let alone save for a distant retirement.”
He cited an analysis by the Urban-Brookings Tax Policy Center that estimated 80% of the tax subsidies for retirement savings go to the top 20% of earners.
“This is government welfare stood on its head,” he said. “There is no rationale for providing a larger tax break to a millionaire than to a Wal-Mart(WMT_) cashier for the same dollar contribution to a 401(k) plan — and nothing at all if the cashier owes payroll but not income tax.”
Phyllis Borzi, assistant secretary of labor for the Employee Benefits Security Administration, also testified. She said that the Department of Labor and other government agencies have several regulatory efforts in the offing intended to boost retirement savings. Among them: reducing barriers to annuitization of 401(k) and IRA plan assets; increasing the transparency of pension fees; improving transparency of target date and other default retirement investments; and reducing conflicts of interest between pension advisers and fiduciaries.
– Written by Joe Mont in Boston.
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Attorney General Martha Coakley called for a moratorium on Massachusetts home foreclosures today in a letter to four major lenders, saying she wanted proof that each is properly reviewing homeowner foreclosure documentation as required under state law.
Coakley said she wanted Bank of America, JPMorgan Chase & Co., Wells Fargo, and GMAC Mortgage, a part of Ally Financial, to suspend foreclosures and sales of foreclosed properties after revelations that some lenders had signed off on foreclosures for thousands of homeowners in other states without reading or verifying the documents, a process nicknamed “robo-signing.’’
“If they’re not complying with the law, it doesn’t give consumers enough time or opportunity to modify the loan or do anything short of foreclosure,’’ Coakley said in an interview. “If that’s what’s happening, it’s pretty outrageous.’’
Officials at Wells Fargo and Bank of America did not return phone calls by deadline yesterday. A spokesman at JPMorgan Chase declined to comment. GMAC/Ally declined to comment on specifics in Massachusetts.
“As we have previously stated, we are confident that the processing errors did not result in any inappropriate foreclosures,’’ GMAC/Ally spokesman Jim Olecki wrote in an e-mail. He said the company “takes this matter very seriously and are acting with urgency to resolve the issue in the affected states.’’
Several large banks have halted foreclosures in 23 states that require judicial review of foreclosures, after evidence surfaced last week that employees were signing and notarizing foreclosure documents without reading or reviewing them. The banks, however, did not halt foreclosures in states that do not require judicial review, drawing the ire of public officials in Massachusetts and elsewhere.
In one of the strongest pushes so far for federal intervention into the problem, more than 30 House members from California have called on federal regulators to investigate whether mortgage companies broke the law by using paperwork that may have contained errors. Led by Representative Zoe Lofgren and House Speaker Nancy Pelosi, the lawmakers have urged bank regulators and the Justice Department to initiate a probe into how borrowers’ requests for assistance have been handled.
Senator Robert Menendez, a New Jersey Democrat, has alsoasked more than 100 mortgage companies to determine whether foreclosure documents they approved contained errors, and toreveal their findings. Attorneys general in Delawareand Texas called on lenders to suspend foreclosures until banks can ensure they have followed proper procedures. Connecticut Attorney General Richard Blumenthal last week asked a state court to freeze all home foreclosures for 60 days.
Menendez and Democratic Senator Al Franken of Minnesota, have also requested that Congress’s investigative arm, the Government Accountability Office, examine whether federal regulators overlooked the problems.
In Massachusetts alone, there were 2,713 foreclosure petitions in August, a 13.2 percent increase from August 2009, according to Warren Group, a Boston-based real estate tracking firm.
Coakley has asked the banks to respond by Oct. 15.
Lewis Finfer, executive director of the Massachusetts Communities Action Network, a housing advocacy group in Boston, said he applauded Coakley’s leadership, because it could help struggling homeowners.
The banks’ actions “were instrumental in the foreclosure crisis and their hands have not been clean in this,’’ he said. “This is very serious. These are people’s homes at stake.’’
Material from the Associated Press is included in this report. Megan Woolhouse can be reached at mwoolhouse@globe.com.
Bloomberg
Wells Fargo Foreclosures Proceed After Data Queried
By Dakin Campbell and David Mildenberg – Oct 6, 2010
Wells Fargo & Co. is standing by the accuracy of its foreclosure filings and won’t follow competitors in delaying seizures, after an employee testified he signed documents for proceedings without personally reviewing records.
The bank said yesterday it doesn’t plan to halt repossessions because its “procedures and daily auditing demonstrate that our foreclosure affidavits are accurate.”
In a May 20 deposition, a Wells Fargo Home Mortgage employee said he signed 50 to 150 documents a day, including statements describing debts and borrowers used to justify foreclosures, without personally confirming the information was correct. His testimony related to a civil claim against the bank in a Washington state court. A judge dismissed the case in June.
Mortgage firms have drawn fire from borrowers, lawyers and state officials for letting employees sign affidavits for court- monitored foreclosures without personally checking loan records. JPMorgan Chase & Co. and Bank of America Corp. last week delayed foreclosures to review the accuracy of their filings. Last month, Ally Financial Inc. said its GMAC Mortgage unit would halt evictions for a similar review.
The Wells Fargo employee said he relied on foreclosure lawyers and personnel in other departments to check files, according to a deposition transcript provided by Melissa Huelsman, the Seattle attorney representing the homeowner. The employee said he confirmed the date on the file before signing without verifying other information.
‘Out of Context’
Those comments “should not be taken out of context,” Wells Fargo said in yesterday’s statement, e-mailed by a spokeswoman, Vickee Adams. The judge “reviewed Wells Fargo’s procedures, documents and declarations and summarily dismissed the borrower’s case, confirming that the foreclosure was valid,” the bank said in the statement.
Such a dismissal doesn’t necessarily invalidate testimony, said Peter Henning, a professor at Wayne State University Law School in Detroit and a former federal prosecutor.
“It’s not that the judge rejected the deposition, or found that the deposition was incorrect,” he said. “The firm probably went back into court and said ‘Here you go, you can inspect all the documents.’ Maybe that was enough.”
Wells Fargo is the second-largest servicer of U.S. home loans, according to industry newsletter Inside Mortgage Finance. The San Francisco-based bank handles about $1.8 trillion of residential mortgages, according to company filings. Bank of America, JPMorgan, Citigroup Inc. and Ally round out the top five. Through June, 92 percent of Wells Fargo’s mortgages were current, according to the statement.
‘How Do You Know?’
Andrew Yates, a Seattle-based lawyer representing the employee, didn’t return calls for comment. Adams declined to comment beyond the statement.
During questioning from Huelsman, the bank employee described his efforts before signing filings.
“So you’re simply signing the document that’s presented to you and you’re just making sure the date is correct?” Huelsman asked during the deposition.
“Correct,” the employee said.
“So how do you know when you’re signing this document that it’s true and correct?” Huelsman said.
“There are people that are responsible for” maintaining the paperwork, the employee said.
States Take a Stance
The employee said he oversaw 53 full-time staff and 15 contract workers, and that other supervisors within the department signed the same amount of paperwork. That would amount to each supervisor signing 1,000 to 3,000 documents during 20 business days each month.
In a separate case in Florida, an employee at New York- based JPMorgan said in May that her team of managers signed about 18,000 documents a month. In a December deposition, an employee at Detroit-based Ally said he signed about 10,000 documents a month. Attorneys general in at least seven states including Texas, Illinois and Ohio are investigating practices at Ally’s GMAC Mortgage unit.
In Wells Fargo’s home state, California Attorney General Jerry Brown asked JPMorgan to prove its foreclosures are legal or else freeze them, and made a similar request to Ally in September.
“This goes to the internal processes and oversight at these institutions with respect to the conduct of their employees,” said Jacob Frenkel, a partner at Potomac, Maryland- based law firm Shulman Rogers Gandal Pordy & Ecker, which isn’t representing any lenders in foreclosure proceedings. “It’s not in the banks’ interest for the records not to be right. As a lawyer I want to go into court with papers that are solid.”
Two homeowners have filed a lawsuit in U.S. District Court in Massachusetts against Wells Fargo for failing to modify their mortgages through the federal home modification program. According to the allegations in the lawsuit, Wells Fargo entered into agreements for temporary trial modifications under the Home Affordable Modification Program. Under this program, lenders agree to reduce homeowners’ monthly mortgage payments to no more than 31% of their income. The lawsuit also says the homeowners complied with the written agreement and submitted required documentation, but Wells Fargo “ignored its contractual obligation to modify loans permanently.”
The Home Affordable Modification Program is a cornerstone of the Obama administration’s efforts to reduce foreclosures, and it is intended to assist up to 4 million homeowners in the next three years. To date, about a million trial modifications have been initiated, and about 116,000 have become permanent. For a trial modification to become permanent, homeowners must make three payments and submit proof of their income.
The lawsuit is seeking to be certified as class action, claiming “hundreds, if not thousands of Massachusetts homeowners” may be in similar situations. The lawsuit names Wells Fargo Bank, as well as Wells Fargo Home Mortgage of West Des Moines and its operating unit, America’s Servicing Co. in Fort Mills, South Carolina, as Defendants. Wells Fargo estimates that only half of the 92,000 homeowners who currently have trial modifications pending will be eligible to participate in the program because several do not return any or all of the required documentation, and then others who have returned all the documentation will be deemed ineligible after documents have been reviewed.
Under program guidelines, servicers had previously been able to collect information from homeowners throughout the trial period. However, beginning June 1st, the Treasury is requiring servicers to verify income before putting homeowners in a trial modification. Wells Fargo, which was to begin doing this on March 1st, stated this “better enables customers to understand if they qualify and what their final payment relief likely will be.” If you need more information on this type litigation contact Bill Robertson, a lawyer in our firm, at 800-898-2034 or by email at Bill.Robertson@beasleyallen.com.
Source: Des Moines Register
Q&A: Putting the Robo-Signer scandal into context
Marian Wang, ProPublica: Articles and Investigations
Saturday, October 9, 2010
The scandal over flawed paperwork and sloppy practices by mortgage servicers continues to broaden. The issue is complicated, and “robo-signers” — individuals working for servicers and signing off on thousands of foreclosure documents without much verification — are only part of the picture. So we brought some of our questions about the broader foreclosure process to Geoff Walsh, an attorney with the National Consumer Law Center, a legal advocacy group for consumers.
Walsh helped fill in some context for us about how the foreclosure process was supposed to work, why it’s not working, and why the recourse available to homeowners depends a great deal on where they live. We’ve edited the interview for length and clarity.
What should people make of this robo-signer scandal that just keeps getting bigger? It’s getting so much attention, but isn’t it just one of the many problems homeowners have experienced with mortgage servicers?
What’s coming out now about the robo-signers in particular is the fact that just about all of the major loss mitigation initiatives, including the federal efforts by the Treasury with the [Home Affordable Modification Program], all rely completely on these same people, the mortgage servicers. To me what the robo-signer issue shows clearly is that the industry is on this path to foreclose as many cases as they can, as quickly as possible with as little work as possible.
There’s no reason to be skirting the law and sending in fake documents to courts if you have any interest in taking good faith measures to avoid a foreclosure and consider loan modifications like you’re supposed to.
Do you think these problems were in any way inevitable, given the incredible volume of foreclosures these major servicers are handling, or is there some intent behind what we’re seeing?
You have to infer some element of intent in not providing adequate staff to keep track of paperwork. Where you have the kind of very consistent pattern of losing paperwork and delaying making loan modifications permanent basically forever, there is a pattern there that I think shows intent not to comply with laws.
It seems like the amount of protection against wrongful foreclosures and the amount of recourse homeowners have is highly dependent on where they live.
Yes, it really is. There are certain states where foreclosures are carried on completely without any judicial supervision, and they can be carried out in two months, and other states [where] a foreclosure can take a year and half.
So if you’re a homeowner and your state doesn’t act, what recourse do you have if you’re facing foreclosure in a non-judicial state?
It’s difficult particularly in non-judicial foreclosure states, unless the states attorneys general take action or there are changes in legislation or homeowners are fortunate enough to get an attorney to represent them … It’s extremely difficult to challenge them.
That’s why these practices have become so commonplace, because you have to file a lawsuit in court to stop a foreclosure. It’s a type of legal proceeding that’s complicated — it requires a motion for temporary restraining order or injunction, and it has to be prepared in a short time frame. It’s expensive. There are very few challenges to foreclosures. In some states, there are very few attorneys that know how to do that.
[Several non-judicial states] have recently enacted statutes that said that before a servicer can complete a non-judicial foreclosure sale, they have to complete a certification saying they attempted to contact the homeowner and reviewed loss mitigation options.
What we may be seeing is in states like California [a non-judicial state], the attorney general in that state would have the authority, I think, to stay foreclosures and review whether major servicers have been compliant with that particular law. That would give a hook for them to conduct review.
In other non-judicial states there’s typically a statutory requirement about who can conduct a foreclosure. It might say that to conduct a non-judicial foreclosure in Michigan, you need to be the owner of the note. So they could be subject to that.
My hope is that non-judicial foreclosure states would be setting up some sort of statutory requirement for these certifications in the future.
How’s the foreclosure process supposed to work? There are so many stories about the process going wrong, it’s almost hard to know what it was supposed to look like.
In judicial foreclosure states, there are requirements that certain legal papers be in order, like the party foreclosing has to possess an original note for the loan, and the mortgage has to be assigned to the party doing the foreclosure, and there ought to be a law firm that is dealing with actual, physical papers that they get.
In a proper functioning legal system, you’d have local law firm, say, in Pittsburgh, Pennsylvania, that is sent all the relevant loan documents, deals directly with someone who has authority to modify the loan, and makes critical decisions about loss mitigation issues. That was standard practice 20 years ago in mortgage foreclosures across country.
In non-judicial states, law firms conducting private sales are also supposed to be getting all of the proper loan documents themselves in their office. They would also be in contact with the people who own the note and mortgage and could make decisions about modifications.
But what you see now is the “foreclosure mill” [law] firms processing paperwork at a local level are often two or three levels down from even the major servicer. So say you have a major servicer like Wells Fargo, and Wells Fargo has contracts with different trusts that own mortgages. What Wells Fargo and other servicers typically do is when loans in their servicing portfolio fall into default, the information about those loans is transferred to other entities, like this Lender Processing Services, LPS, and what LPS does is manage data platforms. LPS has the authority to hire attorneys and firms throughout the country to foreclose on those Wells Fargo mortgages.
[Note: A subsidiary of LPS is currently the subject of a federal probe into how it handled foreclosure affidavits. LPS has acknowledged it once had problems, but says they were quickly addressed.]
So those robo-signed documents — those are often not coming from major servicers but from default servicers. The servicer would just provide loan summary information to a robo-signer, and the robo-signer fills out lots and lots of information — information like, “Yes, we own the loan and we have the right to foreclose; the homeowner owns X amount of money.” That information is put on an affidavit that the robo-signers sign. They forward that to “foreclosure mill” law firms.
[Read: More on these "foreclosure mill" law firms, which handle the cases in court. Several of these law firms were being investigated by the Florida attorney general for their foreclosure practices, until a judge set back that investigation this week by striking down a state subpoena.]
… The problem is that if you base foreclosures on copies of notes or on unverified statements, it is possible that somebody who has the original copy of a note can enforce it later. Lenders are typically proceeding on copies of documents or notes that don’t show that the original has been conveyed to them. Since most [foreclosures] aren’t contested, they pass through the courts. Even in judicial foreclosure states, the overwhelming majority go through without being contested.
What’s the most that homeowners can hope to recover if they’ve been subjected to a process that resulted in wrongful or premature foreclosure?
It depends on where they are in the process. In a lot of states there is a redemption period after a foreclosure sale took place, where a homeowner can stay in the house and still try to pay the mortgage off or take some action to set the sale aside.
In those states where there’s a redemption period and the homeowner is still in it, they’d have some ways to challenge it whether they’re in a non-judicial or judicial state — particularly if the servicer bought property, which is more often than not what happens in these cases.
It’s much more difficult after the redemption expired, and if a third party bought the property. But if you were injured by the sale, if you were harmed financially by the use of financial procedures, you ought to be able to sue for monetary damages for wrongful foreclosure.
Wells Fargo Mortgage in South Florida/ 19 months of Hell and a call to my senator got me an offer for modification from Wells Fargo. Phone call stating this is the offer you must accept or you will never get another offer and you must accept it now on the phone. Ilness and in bankruptcy from medical bills and loss of income of course I accepted in Feb 2010/ But the final papers never arrived dispite my request after request . Finally in April 2010 I insisted I cant sign what you dont send. so I was sent a envelope with a FEMA notice for my signature 2 pages. I complied immediately by overnight return mail and fax compies to 3 depts. No modification papers though so I kept at it . Late april they agreed to send a so called additional copy . Indtimidating and calling me a liar they mailed a package that I waited for 5 day s calling wells fargo daily leaving messages I did not receive the packet yet??? Then allof a sudden Wells Fargo accused me of REFUSING THE PACKAGE per UPS Package refused not ordered // I called and demaded tracking number s and I followed up with UPS and BINGO
I got phone confermation pLUS AND EMAIL FROM UPS STATING WELLS FARGO SENT A FRAUD PACKAGE
they did not want me to get that modification package because they knew I would sign it and they would have to decrease my mortgage by $129 per month
NOW THEY INCREASED MY MORTGAGE TO MAKE SURE I CANT AFFORD IT AND THEREFORE MAKING ME HOMELESS AND DYING WITH ILLNESSES ON THE STREET
Deana
May 24, 2010 16:42
Hi Kathy! I am so sorry to here your story! However my story is very similar. They said they sent my trial period package in November. NEVER GOT IT!!!! My trial period was to begin Jan and end in March. I FINALLY recieved my trial period documents in late March, after the trial was over!!! Wells Fargo is making me crazy!!!! I’ve been dealing with the phone calls back and forth with no results for over a year now. Just this weekend Ihave been doping some research on the internet and have found HUNDREDS of the same stories. It’s just unbelievable that they are allowed to get away with this.
So in the last few days, I have wrote my State Attorney, State representive, The treasury, and anyone else I thought would help. Someone has to stop this!!!
If you are reading this and have some advice or would like to share your story with me, please email me at birthblessing@aol.com.
We would be glad to review your information to see if you may have a case against Wells Fargo. Please email us at web@beasleyallen.com with your contact information and we will have an attorney review your case at no charge.
Thanks!
Melissa Fridlin – Public Relations Assistant
Beasley Allen
Anne Cornwell
Jun 22, 2010 15:21
I reside in North Carolina and have had the same back and forth dysfunctional experiences with Wells Fargo. I was a Wachovia customer, received a trial modification summer of 2009. Wachovia was a dream of efficiency compared to Wells Fargo. I am now on round three of attempts to obtain a modification from Wells Fargo and unless I can get some representation or advocacy I think they will just keep screwing around.
Diane
Jun 22, 2010 21:21
Wells Fargo is UNBELIVEABLE……I NEED AN ATTORNEY THAT WILL SUE THE PANTS OFF OF THEM! I’m tired……it’s been over a year of trying the LOAN MODIFICATION aka FORECLOSURE! Now I am dealing with a guy in the “Office of the President”. He has told me “not to talk to anyone but him” and he will help me get the permanent modification under the HAMP program that I was suppose to have already been approved for. I was approved for a temporary mod and paid what they told me to pay…..next thing you know…. I get a letter from an attorney and Wells has thrown me into foreclosure. It has been postponed until September and in the meantime I paid $150 to an attorney who told me to record all my conversations with Wells….which I have done…now I have Wells on tape stating that they can see the confusion. The left hand does not know what the right is doing!!!!! I sell real estate and I have other realtors sending letters to me about how to conduct a short sale and foreclosure…..how embarassing and humiliating! I sell real estate along the Gulf and now the oil spill has brought my business to a standstill…..Wells Fargo Home Mortgage has hundreds and hundreds of people they are screwing out of their homes…..HELP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
I am sorry to hear that you are having such a difficult time with Wells Fargo. We would be glad to review your potential case free of charge. Feel free to email me at web@beasleyallen.com or call us at 1-800-898-2034 and we will be glad to help you. Thank you,
Melissa Fridlin on behalf of Beasley Allen
Jennifer Slattery
Jun 27, 2010 17:30
I live in Minnesota and I too went to a seminar in St. Paul Minnesota where we were told we could get help. Now we are being harrassed and we were told lies and we need help. It is refreshing to see that we are not the only people. Wells Fargo Needs to pay for what they are doing!! It is not fair! I do not want to tarnish my good credit or lose my home for something they TOLD me to to do.Please help!!!!!
Ms. Slattery,
I am sorry to hear that you are having such a difficult time with Wells Fargo. We would be glad to review your potential case free of charge. Feel free to email me at web@beasleyallen.com or call us at 1-800-898-2034 and we will be glad to help you. Thank you,
Melissa Fridlin on behalf of Beasley Allen
Candace
Jul 8, 2010 12:43
I have been in my modification trail period since Novemeber. I just received my modiciation a few weeks ago. They told me to sign the documents and send in one months payment for July. I did so and the second week of June I recieved a bill for July payment. I called in and they told me it was my misunderstanding and the money sent in was a contribution payment that was not applied to anything. I told them to review phone conversations from May 5 and 6 and they told me that I had to write a written request for them to pull the conversations. I did send in a written request and after weeks of not hearing anything I called in on June 28th and spoke to someone and they said they could handle it and applied the fund correctly and said the payment for July would take affect on July 2. I did not owe for July. On July 8th I looked and it still says I owe for July payment and I will now have a late payment and will be kicked out of the program. I called on July 8th and they said I owe and it was my misunderstanding again. I said to review phone conversations on June 28th and see and they would not. Is there anyway to hold Wells Fargo accountable. It is like they did this on purpose to get more money. I have worked so hard and wasted so much time and energy and still nothing. I need help. I do not have the money for July payment and all charges for their mistakes. I also did not recieve any notice after June 28 phone call that I owe the money.
I’m sorry to hear that you’ve had so much back and forth with Wells Fargo and that it is causing you so much stress.
We would be glad to review your information to see if you may have a case against Wells Fargo. Please email us at web@beasleyallen.com with your contact information and we will have an attorney review your case at no charge.
Thanks!
Melissa Fridlin – Public Relations Assistant
Beasley Allen
EDWARD AGUILAR
Jul 12, 2010 21:37
I NEED HELP AGAINST WELLS FARGO. i LIVE IN CALIFORNIA I’VE DONE EVERYTHING ASKED OF ME. i WENT TO LAS VEGAS FOR THE HAMP GOT PRE QUALIFIED AND WELL IS TELLING ME THE INVESTOR DOES NOT WANT TO REDUCE MY LOAN IN A PLAIN ENVELOPE. i HAVE PROOF WHEN MY LOAN WAS DONE “wELLS FARGO” DID FRAUD ON MY LOAN AND THEY WON’T ACKNOWLEDGE IT. i NEED HELP AND THE TIME IS RUNNING OUT
J. Stacey
Jul 13, 2010 7:45
My husband and I have been tring to re-modify our loan with Wells Fargo for 10 months. Our story is similar to many others. We get the run around on a regular basis. One day they tell us to re-send documentation, then they say they never received it or haven’t heard from us in months???? A couple months ago they did tell us that we did not qualify but then said that we might qualify for another program and we would have to re-submit paperwork. So here we are again sending in paperwork, calling, being told they never received our papework, receiving phone calls from them stating they have been trying to reach us for months. It’s absolutely disgusting.
Me too
Aug 11, 2010 13:25
I am disabled,6` years old.. Called Wells Fargo for mortgage help in January, 2009. I was not in default on my loan then; first, I was told they couldn’t help me unless I was three months behind. Then, in April, I got what I now know was a package for a HAMP modification. Went into the trial period, which should’ve ended in July of 2009. Did everything right-housing counselor, etc. Many, many calls later, over the Thanksgiving weekend, I spoke to a “manager” who sent out a non-HAMP modification that increased my principal without itemizing the increase. Paniced. HUD approved counselor said “don’t sign” I didn’t; did send a letter back saying I was still interested in a HAMP modification. Talked to HUD counselor again, who suggested I contact Fannie Mae. Did that. Bad move. In January 2010, was placed on a second trial period (with lower payment reflecting lowered income). In June, received a call asking for pay stubs; I sighed, told the person that I had been told a month earlier that all information I needed to provide had been provided. and had been through two trial periods. This woman actually tried to help: Called me the afternoon of June 4 to tell she had taken my file personally to finalmodification and that a modificaton package (HAMP) should arrive in 2-4 weeks. Instead, got a call from someone in the “Presidient’s Office”–demanding more documents and syaing that time was limited because of a “complaint from my investor (Fannie Mae);I responded through my local congressman’s office; his assistant called same man,who told her firmly that I needed to send all new materials. In seven days. Did that: faxed 42 pages of documentation; what I received back was a non-HAMP modification (dated the same day I had faxed them) that didn’t touch the interest rate, added the balance of payments not made in full (meaning HAMP trial payments); my payment would be increased beyond what i was when I first asked for help. I didn’t sign it, wrote letter back saying I remained interested in HAMP modification. Pres. office guy told me that HAMP was now out of the question and since I hadn’t taken the other one I had to start the entire process over again with Loss Mitigation. Received letter saying if I didn’t pay my “default” balance of more than ten grand by end of
August I would get accelleration letter, next step, foreclosure. Have contacted my senators office but now have also filed for internal W.F. mod so that I don’t get foreclosed. How do these people sleep at night? Interested attorneys: I have documented every interaction with Wells Fargo by name, date and time since I asked for help in January 2009. I would love to sue.
Me too
Aug 11, 2010 13:26
That’s supposed to be 61 years old. Sorry, I am very stressed.
Angela
Aug 16, 2010 9:27
Hi,
I agree with all of you and will contact Mr. Allen for assistance. Wells Fargo is full of criminals and they are not nearly as smart as they try to make themselves out to be. I too have done all of the back and forth with them and have logged over 800 minutes of phone time with them since June 2010.
I really do believe that the Loss Mitigation department, Collections, and every other department has been thoroughly trained in their bait and switch deceptive practices. They’ve met their match with me though, and I think they realize it. Just the other day one of the senior loan officers slipped and told me that their investors don’t care one way or the other if any modifications are made. He also said “It’s not that we’re trying NOT to do modifications but”…then he stopped.
I sued a major car dealership several years ago for deceptive practices, and WON. I just want you all to stay strong, keep good notes, and keep on keeping on. No matter how dark the situation looks, DON’T GIVE UP! Together, we’ll beat Wells Fargo. I can be contacted at dounto1@yahoo.com.
Thanks!
Formal Complaint –Wells Fargo intractable tactics and inaccurate dealings regarding our home loan. Disregarding our homeowners rights and changing facts to flatly refuse our numerous requests for any consideration to prevent foreclosure. I have made complaints regarding their procedures and found all federal programs provide no real incentives for or penalties against the lender. The HUD counseling offers merely a toothless tiger that has no influence or effect on the lender. I am planning legal actions against them for numerous failures in abiding the rules of the programs they claim to comply with and promote.
OUR HOME – since 1989
6451 Greenbush Ave Van Nuys, Ca 91401
As we await the next correspondence from Wells Fargo, we try to understand why the loss mitigation department has rejected us twice for the HAMP program, miss apportioned our payments and misrepresented their intentions and procedures. We have been told untruths regarding our payments made from February 2010 through August 2010. Although we have demonstrated a sincere effort to meet our financial obligation and have clearly shown our desire to keep our home, we have found an uncooperative lender unwilling to find a solution. Even as we have demonstrated good faith and made every payment requested, we continue to accrue fees and penalties without consideration or explanation.
Our situation is deadly serious, but sadly not unique. Due to the lengthy WGA strike in 2007 and the loss of television production in Los Angeles, we fell behind on our property tax payments in 2008. With little warning, Wells Fargo paid the taxes in January 2010 and established a TAX ESCROW account that increased our payment by 1292.18 per month almost doubling our monthly payment. Payment was 1453.81 since August 2005 and paid on time every month, their actions caused the payment to jump to 2745.99. When we called to inquire, they offered a LOAN MODIFICATION TRIAL. This started a spiral that now we are struggling to recover from. This trial offer was never explained and the consequences of their actions have now put us in a much worse financial situation.
As our financial problems worsened because of unemployment and loss of business income, we sold all valuable assets in 2008 and tried cutting our expenses. But with rising costs and diminishing income we’ve found it extremely difficult to make ends meet driving our credit cards up and our ability to recover less likely. After months of seeking employment, the first job offered to my husband this YEAR began in May. The stress was so overwhelming, he suffered a STROKE on May 21st 2010 that has caused him to become DISABLED. We are in need of SPECIAL CONSIDERATION, but have been treated very badly by our lender in spite of our lengthy history of REGULAR payments for 21 years and our sincere efforts to remedy the situation.
Now, with a disabled husband and a school age child, I am left to fend for myself in this situation. In spite of monthly payments, Wells Fargo Home Mortgage has sent a collection notice threatening to accelerate their foreclosure procedures against us in without consideration for our Herculean efforts to make payments and negotiate with their customer service and loss mitigation departments. Although they have cashed every check I’ve sent and run me ragged trying to comply with their requests for documentation, they have offered us NOTHING and caused me tremendous stress attempting to protect our home from their predatory practices. They are forcing me to take legal actions to protect our rights and homestead.
Seems like this is a pattern of behavior that is well documented by the public. What can we do other than sue them?
Sincerely,
Catherine West
Angela
Aug 17, 2010 12:30
Cat,
I am very sorry to hear about your situation. Trust me, I am now working to help us all. I will keep you updated on my progress.
STAY STRONG!
Angela
Aug 17, 2010 12:52
I just thought of something. The customer service reps must get some type of bonus each time a modification is successfully “squashed”. Why else would EVERYONE you speak with try SO hard to knock you down and discourage you whenever you call. In most companies, customer service tries to do whatever they can to help you during hard times. This must be part of Well’s training module…..STOP THE MODIFICATION….GET THE BONUS! If you actually think about it, only 1 modification could cost Well’s $50,000 or more in borrower savings over the course of the loan. It would be no problem for them to offer a $2,000-$5,000 bonus for blocking the modification. HMMMM….something to think about!
Jenny
Aug 17, 2010 19:10
We were 1 MONTH behinf..1 and so we called Wells Fargo in January of 2009- the rep told us there were tons of new programs but we needed to be further behind so he told us NOT to pay our mortgage for 6 months and then they would put us into a program…Well low and behold we did not pay for 6 months and we were denied–all 6 months of past payments were due immediately- well if we couldn’t pay one month behind how were we supposed to pay 6? they put us into 2 more programs and and we began monthly mortgage payments again. After being denied 2 programs we were told we were not in immediate danger of foreclosure so we didnt qualify they then put us into another program one with a “Trial period “13 months after we initially began this process. We needed to supply all of our paperwork for the millionth time and we had to make 3 monthly “Tial” payments. We made 3 monthly trial payments and were then supplied with a letter that we were denied..no reason..just that we didnt qualify. Oh AND the 3 payments we made were not “Mortgage’ payments so now we were even further behind on our mortgage- BUT now we were in danger of immediate foreclosure. So we were put into ANOTHER program- had to re-supply our paperwork..Just received our mortgage modification agreement…They changed our mortgage from a 30 year mortgage to a 50 year mortgage..Kept out rate the same 8%- our payments went up $30 a month and they added $23,000 to the total price we owe on our house. They told us we have 10 days to sign and return along with a payment of $2019 that doesnt apply to anything or they will foreclose. WTF am I supposed to do now? All because I was 1 month behing. Wells Fargo is making us agree to thousands of dollars in interest. I am soo tempted to tell them to keep the Damn house. See if they can sell it in this economy…but I have 2 kids and dont want to put them through it. I have a job so does my husband. I cant believe Wells Fargo screwed us soo bad.
Is there any way to get Wells Fargo Loan Modification training materials? Perhaps they have documented their own harmful tactics into their training materials and instructions. Perhaps they are distributed to their workers online. As a graphic designer, I often produce training materials and they can spell out the policy they have adopted very clearly.
Every time they call me, they have a script…… May I first confirm the address….this is an effort to collect on a debt etc….Has anyone seen the script they use? I sure would like to.
Scott Hall
Aug 28, 2010 8:49
Wells Fargo approved my loan modifaction loan for 18 months. Not any of the funds were applied to my principal. They have been deceitful and comtempt from the beginning. President Obama should have a complete investigation done with what they have done to me and many others. I have support from Government officials in my state of Michigan. Let’ see if Wells Fargo honors their empty promises and the money the stole from many home owners. The President of the Bank should be terminated.
The worse part …I haven’t missed one payment to them. Depending on who I spoke with the story was always different.
I have come yo the end of my rope its been three months with wells and as all of you lost paper work ,people neer call you back .At this time I am told that its in negotiations with BofA if so why have they not told me if i qualifie ?should they have told me if we have gotten this far any help on this would be appreciated
We would be glad to review your information to see if you may have a case against Wells Fargo. Please email us at web@beasleyallen.com with your contact information and we will have an attorney review your case at no charge.
Beasley
Thank you for your kind offer and would appricate as much help as possible .if you could contact me via e-mail that would be great .
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Wells Fargo Home Mortgage not to be Trusted
Wells Fargo Complaint
June 10, 2010
Attn: To All News Media Outlets and the Whitehouse.
Re. Bad Business with Wells Fargo Home Mortgage !!!!!!!!!!!!
I am a concerned worker for Wells Fargo Mortgage, Who want to remain private for now. A copy of this e-mail and some facts is being sent out to every news outlet in the USA. Also I think
legal action and criminal charges need to be brought against Wells Fargo Company and
some of the big Executives and many of the staff as well. After seeing a lot of wells fargo homeowners have their home foreclosed on as well the harrssing phone calls and under
handed fees that the homeowners are being charged. They (Wells Fargo Home Mortgage
as well the company) should be exposed on a national stage just like countrywide Mortgage.
Just recently countrywide mortg./ Bank of America was ordered to $108 millions back to its
homeowners, cause of the tactics they were doing to the homeowners. Wells Fargo will keep
doing the sneaky underhanded stuff until they are caught or better yet hit in their pockets
or better yet brought to their knees. Let me start off by saying that wells fargo was the servicer
of freddie mac 1st. This is why freddie mac forced wells fargo to by many of the loans they
(Wells Fargo) was servicering. Due to the freddie mac was missing so much profit and
that many of the loans freddie was behind was being foreclosed on. Due to wells fargo
was mishandling the mortgage payments on purpose to force homeowners into
forecloser.After my info that I’m about to provide , you will see a sample of statements
that have been posted on the net about the problems homeowners are having with
Wells Fargo Mortgage. There are hundereds of thousands major complaints
and many lawsuites against Wells Fargo as well. Oh by the way at least
5 to 8 books are either being put together or in the process of being published
about the bad dealing and illegal tactics that Wells Fargo has done and still
doing to the homeowners. Well 1st of when a payment is sent to wells fargo by mail,
we are told to stall as much as possible to apply the payments. Therefore a late fee
can be added to the customer. This apply to home or auto loans. As far as foreclosing on
homes, we are taught to talk the homeowner into doing a loan Mod. or sometimes force
the homeowner into a loan mod. If and when the the homeowner is going through the
loan mod process, it normally takes 2wks to 30 days. We many of times take our time
processing the loan mod, which means the homeowners will get behind in their payments.
Also the homeowner gets behind in their mortgage cause during the loan mod process
the homeowner is told do not send any payments while this process is going on. Therefore
the homeowners gets far behind. If the homeowner sends a mortg. payment to
Wells Fargo anyway , Wells Fargo will send it back. This happened a lot to many
of the hurricane Katrina Victims. From Louisana, Alabama , and Mississippi
just to name a few. I can recall when Hurricane Katrina hit , there was a freeze on
mortg. payments. Due to the fact jobs and homes were either destroyed of
damage very badly. After the storm at left and the cleanup started 100% of the
homeowners were told to make a mortgage payment. The catch was that you as
a homeowner had to pay your current month and back pay 2 months. No payment
plan was worked out. This is when Wells Fargo felt this was a easy way
make major money on the homeowners. Not to mention Congress Woman
Maxine Waters did a special on either abc news or nbc news regarding
how Wells Frago is stiffing the homeowners. Not to mention they love to
jack up your mortgage and foreclose on your home for their profit. Keep in
mind this was going on while they Wells Fargo was the servicer for freddie mac.
Before I forget dosen’t Wells Fargo the company I work for suppose to be
paying back money to the government. It was mentioned 1 time on the news
and that was it. Also the FBI is investing an interest in wells fargo as well.
Dealing with the tactics they are using on homeowners and much more. I have seen
wher we were offered bonuses to call and harrass the homeowners at home or even
their work place even if they are not late on a payment. We were also told to make as many
do a loan mod to jack up their monthly payments and tio make the homeowner
send in extra money as a huge startup payment to do the loan mod. If u and who
ever else read this letter and look at many of the negative statements about
Wells Fargo Mortgage and put it out via news wires. Basically asking homeowners
to come forward watch home many come out with documents talking about their
problems with wells fargo home mortgage. Many people across the country were forced into
bankruptcy due to Wells Fargo Tactics.. For example if you type anything negative and
attach wells fargo home mortgage to it , watch the number of pages that will pop up. The office in
fort mills South Carolina really need to be looked at. That office has a lot to due with the mishandling of Loan Mod. No one wants to to be going through the process of losing
their home or even having more chages put on them. Alot of us at Wells Fargo
feel what we are told to do is wrong . Wells Frago should be liable to pay every homeowner
back they have to file bankruptcy or going through a tricky loan mod process or even jacked
up the homeowner payments for no reason. Also the nasty and underhanded phone calls. I think
freddie mac can breathe a little easier that they are not dealing Wells Fargo Mortgage. This should be also forwarded to many lawyers so they can start a major lawsuite as well as the attorney
generals in many of the states. Also Eric Holder will also get a a copy of this information as well
as HUD. Here are a few samples from the net concerning Wells Fargo to follow :
Wells Fargo Home Mortgage Complaints – Harassing calls!
Wells Fargo is my last choice for future mortgages. I currently have two mortgages with them, one is a rental property. I’ve had the rental loan for 7 years now. I’ve never had to pay a late fee. The tenants have until the 5th to pay, so I send out the payment to WF on the 8th. I have until the 15th according to the loan docs. Since last year they call my home at all hours, weekdays and weekends to harass me until they get the payment. They wake up my toddler and interrupt our family dinners. Whenever I talk to a rep, they are rude and condescending. I am outraged!
yes i fully agree with you on this the bank says were not behind but yet the collections says we are and they are constantly calling us, the best suggestion i can tell you is not to even answer your phone and oh yea right after they call and you see their number they will go to 1800 number so becareful with that. I wish there was someway they can get in trouble for all this try talking to them about hardships and they dont even help you.
Yes I am having the same problem. They are harassing me with phone calls when I am not late until the 15th of the month. I have been paying them 1/2 my mortgage payments every two weeks when we get paid. This helps with our budget. I have all my receipts and have gone to the bank locations to get help communicating with the mortgage customer service. once we are done with the call everything sounds like it is a okay and they will be fixed. Oh no, next month comes around and it starts all over again. Wells Fargo is posting my payments incorrectly and I am receiving harassing phones stating I am behind and if I am planning on staying in the house. I am sick of them threatening me when I am not behind on my payments until the 15th of the month. This has got to stop.
We are having the same problem. Our Mortgage was with Wachovia and got bought by Wells Fargo in October and this has been the WORST experience that we have ever had. We have never been late with a mortgage payment since we bought this house. We have until the 16th to pay the payment and depending on the way our bills fall we have to wait until the next pay period to pay it. The thing that has us mad is that we never were notified that our mortgage was switching to Wells Fargo we only received a statement in the mail. Two months later when one of the customer service reps called her comment to me was “we did not ask for you business”, not to mention how rude she was from the very beginning. So I rudely explained to her that it was us that did not ask for their business. It clearly has on the the statement “pay this amount after the 16th” so if there is an issue with me paying my mortgage in between that time then maybe they shouldn’t have a grace period. This morning they called AGAIN and I was told that the contract I signed with them states, So I had to explain to him that we never signed a contract with Wells Fargo only with Wachovia. So his statement to me was that we need to pay our mortgage on the 1st to stop receiving the phone calls. Who the *** are these people. Then he wanted to take the payment over the phone. Sorry I make my payments online and then I explained to him that I will wait for their phone calls every month b/c I will wait until the VERY LAST MINUTED to pay my mortgage payment.
Join us for a spectacular tasting event that will bring the city’s top restaurants and chefs together for one delicious evening this fall! Meet the chefs that make this city a dining destination. Enjoy stunning views of the city and support a nonprofit near and dear to our hearts, The Greater Boston Food Bank.
General Admission and VIP tickets are available for purchase now!
Set in the Mandarin Oriental Boston, Asana offers diners authentic New England cuisine prepared by Chef Nathan Rich and an entertaining view of the lively bustle of Boylston Street. Excellent service coupled with delicious meals and chic and modern ambiance makes Asana a memorable dining experience.
Located right in Fenway, Basho brought sushi to Red Sox fans. With modern décor and a trendy atmosphere, Basho creates distinctive Japanese inspired dishes but is able to also offer classic sushi. The sister restaurant of Douzo, Basho offers affordable sushi to another popular area of Boston.
Creating seasonally fresh cuisine with his native Italy in mind, Chef Vittorio Ettore keeps his charming restaurant of quality and inventive fare. Open since May of 1999, Bistro 5 has expanded its once “neighborhood gem” feel into a fine-dining experience complete with creative cuisine and personal care.
Overlooking the beautiful Boston Public Garden sits Bistro du Midi with its street-level bar giving diners a vibrant atmosphere evoking a rustic environment. Head upstairs to enjoy the open kitchen and picturesque views of the Public Garden and relish in the simple ingredients, yet bold flavors of Executive Chef Robert Sisca’s Provençal cooking.
Located in the national historic landmark The Liberty Hotel, CLINK offers guests cozy seating with its butcher block tables and warm gold leather seats. Chef Joseph Margate prepares Modern American Cuisine focusing on flavor and dedicated to seasonal and local ingredients.
Voted Best of Boston 2010 for their Whoopie Pies, Finale offers guests a whole lot more than just those creamy filled cookies. Three different locations, an extensive lunch and bakery menu, and their new Desserterie Menu, which includes plated desserts, a prelude menu, and a savory selection of beverages, make Finale a place to indulge in a one-of-a-kind dessert experience.
Eastern Standard’s menu is a classic tribute to European and New England favorites as it entices a diverse crowd with generous portions, handcrafted cocktails, and a wine list displaying worldwide varietals. Located at bustling Kenmore Square, collaborating Executive Chef Jeremy Sewall’s creative dishes and Eastern Standard’s featured raw bar pleases just about anyone who chooses to walk in.
Noted as New England’s premier steak and seafood grill for over twenty five years, Grill 23 boasts prime beef cuts and fresh seafood presentations. Executive Chef Jay Murray showcases signature dishes and classic favorites that reflect the best ingredients of the region. Not only is Grill 23′s creative weekly menu impressive, but their wine list has achieved The Wine Spectator’s Best of – Award of Excellence annually since 2002.
Set along a cobblestone walkway in the heart of Harvard Square, Harvest and Executive Chef Mary Dumont, who has been featured on The Food Network’s Iron Chef America, offer a modern take on New England cuisine focused on using the freshest local ingredients. With Harvest’s warm feeling and understated elegance, diners can enjoy their fresh and creative dishes within the comfort of the restaurant, or venture outdoors to the Garden Terrace for fireside dining.
Lala Rokh, or Tulip Cheeks in its native Persian language, is the only Eastern Mediterranean restaurant of its kind. Located on Beacon Hill, Lala Rokh shares Persian dishes that vary from region to region with different spices and flavors. Proprietors Azita-Bina Seibel and Babak Bina use ingredients and staples of their parents’ native country to recreate and share with diners the home-style Persian cuisine they grew up with.
Located in the heart of the theater district inside the W Boston, Market attempts to maintain the ambience and feeling of “home” in its restaurant. Chef Jean-Georges Vongerichten creates a casual and simple menu focusing on fresh and local ingredients. Classic dishes are reinvented at Market to emphasize flavor and discover different spices from other regions.
Take an adventure into fresh seafood and satisfy your New England seafood craving at Neptune Oyster. Settled in the North End, Neptune Oyster houses a small dining room, perfect for a cozy evening of raw oysters and lobster tails. It’s a hidden gem that will be a great dining experience for seafood lovers alike.
In true bistro form, Chef Jacky Robert creates French cuisine in a quaint and cozy atmosphere. Located in the South End of Boston, this charming bistro offers outdoor seating and friendly service, all at the right price.
Aside from the pristine view at the waterfront Fan Pier location, Sam’s imitates the feeling of a simple American diner with their tempting French Bistro menu. Located on the second floor of the new Louis Boston, Sam’s has it all; spectacular location, reasonable prices, impeccable service, and delectable fare.
Set in the heart of the North End on Hanover Street, Strega and Chef Salvatore Firicano prepare authentic Italian cuisine for any diner that stumbles upon the cozy Italian bistro. With homemade pasta and sauces, it’s difficult to tell if you are dining at Strega or in Italy.
Winning more than twenty awards and publishing 4 cookbooks, Jasper White and his 4 Summer Shack locations are collecting rave reviews everywhere. Whether you’re dining at the Back Bay location with fellow Red Sox fans and Boston Symphony patrons, the Connecticut location at Mohegan Sun, or the flagship location in Cambridge, Summer Shack is a favored place for all ages.
At O Ya, Chef Tim Cushman uses the freshest top-tier ingredients to create impressive dishes appealing to sushi lovers alike. O Ya cuisine is inventive and flavorful giving diners a beautiful presentation; almost too attractive to eat. Not adhering to conventional sushi but offering amazing creations, O Ya is a culinary experience not to be missed.
A dual citizen of both New Zealand and Australia, Executive Chef Stuart Race created a menu that offers inventive small plates of contemporary American cuisine that compliment the relationship between food and drink – hence the name of the restaurant, Pairings. With floor to ceiling windows, warm tones, and textural fabrics, Pairings provides diners with a relaxed social dining experience and Race’s creative food and drink combinations perfectly compliment one another to give patrons a satisfying meal experience.
Described as an urban tavern, Post 390 is perfectly situated between South End and Back Bay neighborhoods. The first of this two floor traditional tavern boasts a 25-seat bar, a gorgeous four-sided fireplace, and a massive wrought iron staircase leading the way to the second floor where guests can enjoy the exposed kitchen and look out to views of Boston landmarks Copley Place, Trinity Church, and the Hancock Tower. Dig into Executive Chef Eric Brennan’s simple, yet diverse and memorable menu while looking out across the city.
Dine at Upstairs on the Square and you will have the option of dining in one of two quirky dining rooms. The Monday Club Bar showcases a lively environment and offers a menu of seasonal “casual haute cuisine.” Venture to the Zebra Room in front of the dining room and be awoken by a bright and colorful room that gives panoramic views of Winthrop Park in Harvard Square. The Upstairs Soirée Dining Room, just as elegant and colorful as The Monday Club Bar, serves a fine dining menu created by Chef Brand.
Executive Chef Mark Goldberg designed a regional ingredient-driven menu, featuring the finest quality ingredients backed by knowledgeable and courteous service. Woodward, named after a tavern once owned in the Ames family home, is a take on a modern day tavern providing diners with unique dishes that integrate the freshest local foods and a diverse beverage program.
IN THE Massachusetts congressional delegation, Stephen Lynch stands out for his lone-wolf stances. He voted against bailing out the financial system, in favor of the Iraq war, and, from vote to vote, was on both sides of the health care debate. In a delegation that prides itself on unity, he often goes his own way. In Boston, where he is one of two representatives to Congress, he has chilly relations with City Hall. In Washington, where most other Massachusetts House members either occupy leadership positions or exert strong pull with the speaker, he operates outside of his party’s leadership. He is a member of Barney Frank’s Financial Services Committee and also serves on the Oversight and Government Reform Committee, from which he chairs the subcommittee overseeing the District of Columbia. For his Ninth District constituents, it’s a far cry from the power and influence wielded by his predecessor, Joe Moakley.
In his re-election campaign, Lynch touts his independence, saying it means that leaders like Nancy Pelosi “don’t take me for granted.’’ Lynch’s challenger, Mac D’Alessandro, a public-interest attorney and union activist, has focused on Lynch’s votes — especially on health care. But an equally important question is whether Lynch’s approach to his duties is paying off for his district. Sometimes, lone-wolf stances can be admirable. But after nine years in Congress, there’s little evidence that Lynch’s independent path has led to much more than a string of frayed relationships. There have been times when constituents cheered Lynch’s willingness to buck the tide; but on other occasions, those same constituents were left scratching their heads.
To his credit, Lynch has been a strong advocate for causes that are important to voters in his district, such as veterans’ benefits and the concerns of organized labor, except on health care. He’s also taken his position on Iraq seriously, visiting the country many times and schooling himself on national security. But there is no doubt that this district was better served in the past by a congressman who sought to gain national clout and deliver for his constituents, and there’s no reason why it can’t again.
D’Alessandro has a ground-level perspective on the district. A graduate of Boston College Law School, he dedicated himself to community activism, first though Greater Boston Legal Services, where he rose to legislative director and lobbied Beacon Hill for job-training programs, and more recently as political director of the Massachusetts Service Employees’ International Union. Clearly, SEIU’s anger at Lynch over health care motivated D’Alessandro’s challenge. But his quarrel with Lynch is also about style and energy: He argues that the district needs a more resourceful advocate, a representative who defines his priorities clearly and sets out to produce measurable returns.
On health care, D’Alessandro faults Lynch as much for failure of leadership as for his unyielding refusal to support the final reform package, despite urgent entreaties from Pelosi, Vicki Kennedy, and his Massachusetts congressional colleagues. From the start of the health care debate, while other representatives were striving to put together a bill that met the complexities of the challenge, Lynch held himself out as a critic. He was the only Massachusetts House member who refused to commit to a public option. But then he voted for a bill that had a public option, and whose near-universal coverage was funded by a surcharge on the wealthiest Americans. When that bill had to be changed to accommodate the Senate, he flipped again, opposing it on the grounds both that it lacked the cost-saving mechanism of a public option and that it was funded by a tax on expensive health plans.
That last vote especially rankled his fellow Democrats, who saw it as a once-in-decades chance to achieve near-universal coverage. The bill also included $11 billion for neighborhood health clinics, of which there are 14 in or near his district.
While Lynch’s votes are individually defensible, collectively they provide a mirror into his politics. When others saw opportunity for historic reforms, he offered skepticism. When others stepped forward to shape legislation, he held back. D’Alessandro would be quite different: More cautious about military interventions, including Afghanistan; more willing to do the necessary work of reforming the economy, even when it involves unpopular fixes like bailing out the banking and housing industries; more eager to be a leader both in extending health coverage and in bringing research dollars to Massachusetts.
Coming into Congress as a freshman, D’Alessandro would be at square one, but ironically would have more favor with his party’s leaders than Lynch. For nine years, Lynch has honorably followed his own path. D’Alessandro is an articulate advocate for working people who deserves a chance to show what he, too, can do.
With his signature bombast, Dana White has vowed to “blow the (expletive) roof” off TD Garden.
And the UFC president will attempt to back up that boast when his mixed martial arts organization makes its Massachusetts debut at the Garden with Saturday’s pay-per-view event, UFC 118.
White, media savvy and ever-quotable, will be ubiquitous this week. He’ll attend Wednesday’s Red Sox [team stats]-Mariners game at Fenway Park [map] and will make numerous radio and television appearances. And there will be plenty of star power around the city with dozens of UFC fighters on hand for the Fan Expo at the Hynes Convention Center on Friday and Saturday.
On fight night, music will blare, fans will roar and the action will excite.
It figures to be a wild week. But getting the UFC to Boston was the result of a quiet and steady process that took years.
Mapping out plans
The map, measuring about 4 x 6 feet, rests against the window in Marc Ratner’s Las Vegas office.
Displaying the United States and Canada, the map features three colors: green, yellow and gray, representing the different stages of MMA regulation.
Green means MMA is sanctioned in the state, yellow means regulation is pending and gray means the state or province has no athletic commission, as is the case in Alaska and Wyoming. The UFC won’t hold an event in unregulated states, so the organization has strived for MMA regulation in the other 48 states with commissions.
When Ratner joined the UFC in 2006 after 14 years as executive director of the Nevada State Athletic Commission, there was far less green on the map. MMA was sanctioned in 22 states and faced an uphill battle, due to lingering misconceptions that the sport was no-holds-barred.
As the UFC’s vice president of regulatory affairs, Ratner has spearheaded the effort to get the sport regulated across the country. Well-respected from his time overseeing many of the biggest fights in boxing, Ratner set out to educate legislators about MMA.
“It’s always about education,” Ratner said. “We had to do more education to really have the legislators really understand exactly what we were doing and really explain to them about the healthy and safety.”
While the UFC aimed to grow the sport globally, it had a keen eye on a few markets. One of those targeted spots was Massachusetts.
Though smaller, local promotions had legally conducted shows for years, there was no government regulation.
The first step in bringing UFC to the Bay State came in May 2008 when White and Ratner enlisted the Dewey Square Group, a Boston-based lobbying firm. Though it succeeded in getting an MMA regulation bill passed as an amendment to the 2008 budget, there was not enough time for a full hearing, so it didn’t get through the legislature.
When a new legislative session began in 2009, State Sen. James E. Timilty, the chairman of the public safety and homeland security committee, made the bill a priority.
“We should have some oversight just to make sure something doesn’t go wrong,” said Timilty (D-Walpole). “And secondly, there’s a significant economic benefit.”
At a hearing in front of the public safety committee at the State House in April 2009, Ratner was joined by other executives and UFC lightweight Kenny Florian, a Dover native who is set to fight on Saturday’s card.
The bill ultimately faced little opposition, passing by a 34-1 vote in the Senate and a 144-10 vote in the House. Gov. Deval Patrick signed the bill into law in November.
Massachusetts then became the 42nd state to regulate MMA. Such progress wouldn’t have been possible without Ratner’s work.
“The guy is legendary for his work with the (Nevada) athletic commission,” White said. “To have a man like that going out representing us and working with all these other commissions to get it done, you can’t put a value on that.”
Garden is ripe
Regulation paved the way for the UFC to come to Massachusetts, but it wasn’t the final hurdle. The UFC needed a venue, and though there was some discussion of an outdoor show at Fenway Park, TD Garden – home to the Celtics [team stats] and Bruins [team stats] – was the only realistic option.
Once MMA got regulated, the UFC and Garden quickly agreed on the date.
“We knew from seeing what was happening in other major markets that the UFC is breaking out and doing incredible numbers,” Garden president John Wentzell said. “The interest is skyrocketing, both live as well as on the pay-per-view side. We knew it was a very hot commodity and it hasn’t disappointed.”
The state also needed to revamp its athletic commission to include officials with backgrounds in mixed martial arts. The three-person commission grew to five.
Though the commission has experienced some growing pains, everything is now going smoothly with UFC 118 now just six days away. Commissioner Todd Grossman – noting that “the biggest show on Earth” is about to be held in Boston after just five months of planning – said it is testament to the panel’s hard work and progress.
“The fact that we’ve been able to get a program up and running as efficiently as we have is quite impressive for a government agency,” he said.
Green means go
Ratner’s map now has 44 green states. Among the UFC’s priority destinations, only New York remains unrealized, but Ratner considers regulation in the Empire State inevitable.
That’s the same belief Ratner had in Massachusetts when he set out to convince its lawmakers two years ago. Now that it’s come to fruition, the UFC will get the big, glitzy payoff for all the dull, behind-the-scenes work.
“You know how much this means to me and how long I’ve wanted to come there and how much I love the city of Boston,” said White, who once lived in South Boston and ran a boxing gym in the Hub. “Boston has always been good to me. Believe me when I tell you, I’m going to put on a show that’s going to blow the (expletive) roof off that place.”
Boston’s Fort Point Channel, for decades a polluted workhorse of industry, is about to undergo a dramatic transformation to a recreational and social playground that could host floating restaurants and music shows, kayak rentals and fishing charters.
This fall, major property owners along the channel will lay the groundwork for its renaissance with new public docks that will increase access to the milelong waterway, advancing the city’s vision of a civic space akin to the Boston Common or the Rose Fitzgerald Kennedy Greenway.
An $11 million plan for improvements to the channel is modeled, in part, on waterfronts in Chicago, Seattle, and other cities where museums, outdoor dining, and public events draw crowds to their shorelines.
The catalyst for the burst of activity in Boston is a law signed earlier this month by Governor Deval Patrick that essentially rezones the channel for recreational use, allowing installation of docks and other floating structures that were once banned to protect commercial navigation.
“These changes will allow us to take an urban waterway and activate it in ways that have been very successful in other cities,’’ said James Rooney, head of the nearby convention center and president of Friends of the Fort Point Channel, a civic group involved in the channel restoration.
Most of the boat ramps, taxi stations and docks will be built by commercial property owners who are required by their environmental permits to improve public access and amenities to their waterfronts.
Funds for many other improvements, such as floating art barges and water festivals, will be raised from fees charged to firms planning future building projects in the area.
New developments are moving slowly in the down economy, so it may take several years before new attractions are built. The shuttered Boston Tea Party Museum, for example, is still raising money to complete renovations and reopen facilities closed after being struck by lightning in 2001.
Another wave of improvements will probably result from the eventual redevelopment of the US Postal Service mail facility, which is planning to relocate to South Boston. But that project, too, has also been slowed by the recession.
Still, the new access points to begin construction this fall will open the channel to an array of possibilities, including floating restaurants and cafes, fountains, model boat racing, and other attractions included in a plan City Hall has for the area.
“I’ve always seen this area as a great opportunity for rowing and other events on the water,’’ Mayor Thomas M. Menino said in an interview. “Right now, it’s really just dead, unused space. But the improvements in access will help us open it up and plan for the future of that whole area.’’
Already Boston Properties has built a 60-foot ramp to a dock that will provide temporary docking service for visiting boaters behind the 32-story tower it is building at the corner of Congress Street and Atlantic Avenue. The tower will have an expansive publicplaza on the channel to eventually include a new tour service and concierge desk that will provide information on waterfront attractions.
Further up the channel, Procter & Gamble Co., which owns Gillette and its sprawling headquarters in South Boston, will begin construction this fall on a 60-foot dock in an area that will be dedicated to canoeing and kayaking. City officials are also urging Procter & Gamble to provide free public parking on its property, a request the firm is considering.
The Boston Children’s Museum is planning to build a dock for a water taxi station next spring. The museum is also exploring floating educational facilities and a possible partnership with a boat rental service, although those plans are still being developed.
“We would love to see this channel come alive,’’ said Amy Auerbach, the museum’s chief financial officer. “There are so many teaching and learning opportunities, and we want to take advantage of that as much as we can.’’
In many ways, Fort Point is ideal for a public park. The channel itself is about a mile long with a watersheet stretching more than 50 acres, making the area larger than the Boston Common. The expanded access will offer new perspectives to view the Boston Tea Party, which was staged in this corner of the harbor in 1773, and the wharves and warehouses that made the city a maritime center. The channel is also protected from wind and choppy surf, making it an ideal place to learn to use kayaks and canoes.
Parts of it still suffer from its past as an industrial zone, particularly the further reaches between the MBTA railroad tracks and Interstate 93, where trash and other debris are in plain view.
For more than a century, the channel was an active shipping route that provided access to smoke-belching rail and lumber yards in South Bay. But commercial traffic slowed dramatically in the 20th century, and for the last 50 years it has remained largely unused.
Recently some portions of the channel waterfront were spruced up. A new boardwalk in front of the Boston Children’s Museum, for example, is a popular fishing site, a fact that still seems surreal to those who remember when water in the channel was repellent to any form of life.
Rooney is a South Boston native who vividly recalls the rotten-egg stench emanating from the channel during his youth.
“It was so bad you didn’t even want to walk or drive over the bridges, ’’ he said.
As the Greenway was a byproduct of years of Big Dig construction, Fort Point Channel’s comeback is due to another major public works project: The $3.8 billion cleanup of Boston Harbor, which removed decades worth of sewage and industrial filth and made the water safer for recreational use.
While today its gray-green waters are hardly pristine, the channel is free of dangerous levels of contaminants, and it offers a pleasant getaway for residents and office workers. Sunny afternoons bring lunch-time crowds; office workers gather with their Blackberries out as children fish and tourists whiz by on bicycles or Segway scooters.
Getting to the next step could take years, but environmental advocates say the first wave of change promises that the once-forgotten channel is on its way to becoming a much livelier place.
“It’s not instantly going to be Venice on the water, but it will offer cultural activities that people can easily access,’’ said Vivien Li, executive director of the Boston Harbor Association. “People from all over the city will be able to enjoy the waterfront in a very safe area.’’
Thousands of bridal show exhibitors were jilted in an alleged scam in Boston, according to the FBI, which says a Pittsburgh woman cheated wedding businesses out of thousands of dollars for a “show” that never happened.
The FBI said 47-year-old Karen Tucker, who was arrested Tuesday, pulled off similar bridal show scams in five other states. She’s charged with wire fraud and aggravated identity theft.
Tucker and an uncharged co-conspirator allegedly posed as representatives of a business known as The Boston 411, then led the Massachusetts Convention Center Authority to believe they would hold an extravagant home and bridal show at the Hynes Convention Center over three days in March.
The heavily promoted show promised exhibitors face time with thousands of pre-registered brides-to-be, though few were actually lined up, authorities said. Prosecutors said Tucker and the other person collected fees in advance from exhibitors, but used most of the money for personal expenses, including rent, restaurants and shopping trips to Wal-Mart.
Tucker’s business even promised some money from the never-held show would be used to help victims of the Haiti earthquake, authorities said.
Tucker made a brief appearance in U.S. District Court in Pittsburgh on Tuesday. She will be held without bail until a detention hearing can be held in Boston.
Boston wedding photographer Aram Orchanian said he paid $750 through the PayPal online money transfer service to rent a corner booth at the Boston show and spent $3,000 more to produce promotional materials for it.
“I don’t understand how somebody can do this,” Orchanian said after learning of Tucker’s arrest Tuesday. “It’s just money to her, but to the people she did this to, it is their business.”
Tucker also allegedly conducted scams against wedding businesses in Ohio, Florida, Maryland, Nevada and Texas. Authorities said she ran a scheme in Miami between March and July of 2009, when an online version of “South Beach Bride” magazine was created with the promise that a printed magazine with ads from paid advertisers would be published and distributed. No printed magazine was published and the advertisers were not refunded their money, authorities said.
Durivage said authorities believe Tucker and her co-conspirator have, “with varying degrees of success,” run similar schemes in Columbus, Ohio, Las Vegas, Baltimore and Dallas.
Mario Tama / Getty Images U.S. Treasury Secretary Timothy Geithner speaks about financial reform at New York University’s Stern School of Business on August 2, 1010 in New York City.
Treasury officials are fanning out across the country this week to cities known for their financial institutions, including Boston, Charlotte and Philadelphia, to sell financial reform to Americans.
First stop: New York, where Treasury Secretary Timothy Geithner gave a speech late Monday afternoon at NYU’s Stern School of Business. There, before a small audience, he laid out the moral argument for financial reform and urged bankers to act before the government forced them to curb their excesses. “You can do all of that right now even before the first new rule of financial reform is written,” he said. After charting out the causes of the Great Recession, Geithner went through the four pillars of financial reform: consumer protection, mortgage lending, the derivatives market and increased leverage for global financial institutions.
Though his speech gave a more detailed look at the Obama administration’s plans, the crux of his talk centered about the ethical argument that banks need to keep more capital on hand and regulate themselves—just as consumers need to do a better job of saving—all for the good of the country. Both the tone of the speech and the Treasury officials’ roster of appearances were reminiscent of the way President Obama’s people marketed health care legislation and the stimulus package.
In early February 2009, Obama went to the heart of communities hit by the Great Recession: Elkhart, Ind., Fort Myers, Fla., and Peoria, Ill., to talk up the need for a stimulus package—just as Geithner came to the heart of the banking industry in Manhattan on Monday. A large segment of Geithner’s talk centered on the ways financial reform will help consumers. He talked specifically about simpler disclosures for auto loans, credit cards and mortgages, as well as better enforcement of consumer finance and mortgage scams, much like the Obama administration’s recent efforts to try to explain to health care reform to the general public by talking about the ways it would help ordinary Americans. The administration recently spent $700,000 on national cable TV ads, for instance, in which Andy Griffith says health care reform will give seniors free check-ups and lower prescription costs.
But, moral arguments notwithstanding, the administration still needs to sell the bill to bankers and financial leaders if not in public, then at least behind closed doors.
Geithner met Mayor Michael Bloomberg for breakfast Monday morning and privately ate lunch with leaders from the city’s financial and real estate sectors. According to Reuters, the lunch list included Laurence Fink of BlackRock, Donald Marron of LightYear Capital, Eric Mindich of Eton Park Financial Management and James Tisch of Loews Corp.
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NEW YORK – A burrito company known for super-sized stuffed tortillas goes small. A chocolatier turns to cheaper pick-me-ups rather than expensive indulgences. A furniture retailer expands in the midst of the housing market bust.
Three businesses with three different stories, yet one unmistakable conclusion. For all the hand-wringing about the economy, plenty of companies are getting it right. They’re doing it the same way businesses have survived bad economies for decades: through innovation, cutting costs
and a little luck.
“When you see big national companies struggling, many times I wonder how we will make it,” says John Pepper, who founded the Boston-based burrito chain Boloco 13 years ago. “We are constantly blocking and tackling. We have to be.”
What follows are three good-news stories in a bad-news economy.
Trouble for Boloco’s burrito business showed up two years ago in the form of brown paper bags, the kind that workers in Boston’s financial district were using to tote their lunches in from home. As that was happening, two national burrito chains, Chipotle and Qdoba, expanded in New England, where Boloco has 16 stores.
It didn’t take long before the crowds thinned at Boloco. The worst part was that business dropped in the first and last 15 minutes of the two-hour lunchtime crush. The result: sales fell about 20 percent in its city locations and 10 percent across the company.
“The shoulders of the business fell off a lot,” Pepper says. “People were ordering the same, but there were less people.”
Pepper knew that offering cheaper and smaller items during a recession can be a bad idea in the food business. Slowing sales can get slower if too many people trade down. But he still thought there was an opportunity to grab people who didn’t want a huge burrito for lunch or might want to try some of his food without committing to a larger size.
The “mini” line includes burritos, shakes, smoothies and bowls, which has all the stuff that goes in a burrito except the tortilla. The 8-ounce mini burrito goes for $3.95, compared with the $6.25 for the 20-ounce original and $5.35 for a 14-ounce small. A mini shake sells for $2.95, while the original goes for $4.50.
Not only did people come back, now they visit more often. They don’t just buy a mini burrito, but pair minis together, or better yet, they buy an original burrito and then tag on a mini shake.
The value of the average transaction is up about 8 percent, and overall sales and profits are about 13 percent higher than a year ago.
“What we did was controversial because we are in the ‘super-size me’ business, but it worked,” Pepper says.
Lake Champlain Chocolates owner Jim Lampman was also watching his thriving business slow as the recession took hold two years ago.
The Vermont-based company’s annual sales fell by about 8 percent. Many of the 3,000 stores that carry its chocolates began ordering less and some stores couldn’t pay their bills.
Lampman, who founded the company in 1983, eliminated higher priced items and priced candy in ways that would attract buyers, like under $20, $15, $10 and $5.
A chocolate lollipop that once sold for as much as $6 was knocked down to $3.50 or so. Each one, from hearts to pumpkins, is hand-painted, so he scaled back on the design to save labor costs. He kept his seasonal packaging the same last year, saving $100,000. He depleted the inventories that he had.
Lampman also recognized the value of keeping his customers. He shipped products even when a store didn’t spend the required minimum of $250. He forgave some outstanding bills.
“A downturn like this forced us to be more focused on our operations and how we handle products,” Lampman says. “The result was we got all the business back we lost, and now are having one of our best years ever.”
At Unlimited Furniture Group Inc., owner Lenny Kharitonov thinks this is the right time to build his New York-based retail and distribution company into a national chain.
In the last two years, he expanded to seven stores from two and entered new markets in Chicago, Atlanta, Orlando, Boston and Washington. He took advantage of a glut of commercial real estate to negotiate flexible and affordable leases for new stores.
Kharitonov also uses the drop in newspaper advertising to his advantage by getting cheaper rates. Finding talented workers is easier and less expensive, too, because unemployment is so high.
It’s a risky strategy during the housing slump. The furniture business suffers when people don’t move, which means they don’t need new things for their homes. Plenty of his competitors have closed stores or gone out of business.
Kharitonov is making money, but not a lot.
“If we can be successful in a bad economy, then we will be in good shape in a stronger economy,” Kharitonov says.
He’s got a point. The economy will eventually lift from its funk. When it does, these companies should be well on their way.
___
Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck(at)ap.org
A victory celebration that never happened cost the cash-strapped city nearly $450,000 in police overtime as an army of cops hit the streets to control expected crowds of Boston Celtics [team stats] fans during the NBA Finals.
The Celts failed in their bid to win an 18th title, but a City Hall watchdog says the team should foot their fair share of the police OT bill just the same.
“The economy is down, but with the playoffs, money is coming in for the Celtics,” said Matthew Cahill, executive director of the Boston Finance Commission. “Taxpayers shouldn’t shoulder the complete burden of these things. It would only be just to share the burden of the police overtime.”
But it’s unlikely the Menino administration will go after the Green for the green, seeing it instead as a responsibility for the Police Department’s ranks of blue.
“The Boston Police Department develops safety and security plans, and Boston police will consider all revenue sources (to cover the costs),” said Dot Joyce, spokeswoman for Mayor Thomas M. Menino.
BPD spokesman Eddy Chrispin pointed out that the city, not the sports teams, traditionally pays for overtime following playoff games during title runs.
Cracking down on rowdy rooters outside the TD Garden and the Fenway bars on June 15 and 17 – Games 6 and 7 of the NBA Finals – cost $441,363, according to the Boston Police Department.
Cahill noted there is a history of partnership between the city and its teams to pay for police. The Celtics and local businesses helped pay for cops at championship parades in the past, most notably kicking in $350,000 – half of all noncop costs – when the Green Team hoisted its 17th banner in 2008.
Cahill, the city’s finance watchdog, said there’s nothing wrong with asking.
“It would be even better if the Celtics offered,” Cahill said. “They benefit financially from the playoffs.”
Calls and e-mails to the Celtics were not returned.
The nearly $450,000 paid for a dramatic show of force for the final two games of the 2010 NBA Finals, as Hub police brass sought to tamp down on shenanigans and mayhem that marred earlier sports celebrations.
In all, 3,159 officers over two days were used to keep a lid on violence in North Station and the Fenway. Police shut access to streets and barred patrons from entering taverns after the third quarter.
Industry tracker Dow Jones Venturesource hailed a return to pre-recession levels in venture capital investing in the second quarter of 2010, but when combined with a dismal Q1, the venture industry remains on track for a $20 billion to $25 billion year in 2010.
VCs invested $7.7 billion over 744 deals in Q2, a 26-percent increase over the dollars invested, and 13 percent above the deals done in the same period in 2009.
Massachusetts enjoyed its share of the upswing, with $792.2 million invested over 81 deals – a 19 percent increase in activity, and a 56-percent increase in volume, over the year-ago period, when investors put $508.2 million to work over 68 deals.
However, New York was a fast follower, with $412.2 million invested in 63 deals. California remained the leader by far, with $3.96 billion invested over 296 deals.
Nationally, average deal size broke the $10 million mark for the first time since before the fall, 2008 financial collapse, reaching $10.4 million on the strength of outsize deals in the energy sector, where the average deal sizze shot to $43.8 million, compared to $22.6 million in Q2, 2009.
The New England region’s largest energy deal on the quarter was Westborough-based lithium ion battery maker Boston-Power Inc., which took $62 million – up from $60 million initially reported – from existing investors Foundation Asset Management, Oak Investment Partners, Venrock and Gabriel Venture Partners.
However, the region’s biggest deal of the quarter closed in the IT sector. In April, Summit Partners invested $96.5 million Casa Systems Inc., an Andover-based company that makes network equipment for delivering video over cable.
Fancy a $675,000 penalty for illegally downloading 30 songs off the Internet? That was the kind of music Boston University graduate student Joel Tenenbaum was ready to face following a July 2009 verdict that found him liable for sharing 30 copyright-protected songs on the popular Kazaa P2P network.
The damage–$22,500 per song–has since been lowered by U.S. District Judge Nancy Gertner, who cut out roughly 90 percent of the original penalty to a more “manageable” $67,500, or $2,250 per pirated track. We say that as we do, for the move still puts Tenenbaum in an untenable financial position.
“A $67,500 pricetag for 30 songs is still a bill Joel cannot afford,” wrote Debbie Rosenbaum on the site Joel Fights Back. “Even Judge Gertner added, ‘Significantly, this amount is more than I might have awarded in my independent judgment.’”
The Recording Industry Association of America, plaintiffs in the case, remains less than thrilled by the decision. According to a statement released by the RIAA, the group plans to contest the decision on the grounds that it invalidates the carefully construed arguments–reached by a jury–as to the reparations owed.
“The judge appropriately recognized the egregious conduct of the defendant, including lying to the court about his behavior, but then erroneously dismisses the profound economic and artistic harm caused when hundreds of songs are illegally distributed for free to millions of strangers on file-sharing networks,” the organization said.
Interestingly, Gertner’s reduction in fees exactly matches a similar reduction performed by Michael Davis, chief judge for the U.S. district court for the District of Minnestora, in the not-quite-so-different case of Jammie Thomas-Rasset versus the RIAA. Thomas-Rasset, found liable for infringing 24 different copyrights for sharing music on Kazaa, was facing a $1.92 million penalty herself.
Finding the penalty to be too far into, “the realm of gross injustice,” said Davis, the judge instead reduced the total damages to $54,000. That’s $2,250 per song as well, or three times the minimum amount provided for by U.S. copyright law.
That doesn’t mean that the RIAA has accepted the ruling, however. In fact, the group elected to pursue its rights to a third trial against Thomas-Rasset and Davis, in response, ordered both parties to figure it all out via third-party arbitration. That didn’t quite work, and the third case against Thomas-Rasset will kick off on October 4 of this year.
Though it might appear that judges are looking to set a payment precedent in cases of P2P-based copyright infringement of music, the RIAA has made it clear that it’s equally willing to go to the mat to preserve what it feels are fair and adequate restitutions for its member labels.
That said, these two major court cases are, indeed, the only ones that have actually gone to trial based on the RIAA’s lawsuit threats–most accused settle out of court to an amount far less than the $2,250-per-song “standard” that’s emerging.
24/7 Wall St. has created a new list of brands that may disappear, which includes Readers Digest, Kia Motors, Dollar Thrifty (NYSE: DTG – News), Zale (NYSE: ZLC – News), Blockbuster (BLOKA.PK – News), T-Mobile, BP Plc (NYSE: BP – News), RadioShack (NYSE: RSH – News), Merrill Lynch and Moody’s (NYSE: MCO – News).
24/7 Wall St. regularly compiles a report of brands that are likely to disappear in the near-term. Last April, and again in December, we published our findings. Usually, it would take a full year before such a list could be compiled again. However, the current economic climate has accelerated this process and a majority of the brands on the first two lists are either gone, have been acquired, or have filed for bankruptcy.
With a number of the brands on the December list either gone or on a short-term path to extinction, 24/7 Wall St. has put together the latest version of the Ten Brands That Will Disappear. To qualify, we expect that brand to be gone by the end of 2011, or for its parent to be sold or go into Chapter 11.
Reader’s Digest was once the most widely read magazine in the world. According to the company, it still may be when its overseas editions are taken into account.
Last August, the company took its U.S. operations into Chapter 11 to decrease debt. It emerged from bankruptcy in February with $525 million in exit financing. The company cut the number of issues it publishes a year from 12 to 10 last year. It also cut its circulation guarantee for advertisers to 5.5 million copies from 8 million. It would have been unthinkable just a few years ago that a magazine as old and famous as Reader’s Digest would be shuttered. However, Reader’s Digest as it is known in the U.S. will be gone.
Blockbuster was the national leader in the video rental business for nearly two decades. Now it is contemplating Chapter 11 to eliminate debt. The company lost $65 million last quarter. Its revenue continues to fall rapidly as firms such as Redbox and NetFlix (Nasdaq: NFLX – News) siphon off its revenue. Blockbuster has more than 6,000 stores, so it is hard to imagine that the company could disappear. But, there is some precedent, even if it is on a smaller scale. Blockbuster rival Movie Gallery said in February that it would close all of its 2,400 U.S. stores. Blockbuster’s model of renting movies through physical locations has been destroyed by cable and satellite video on demand, DVDs via mail and dispensing machines. Blockbuster may still be around as a company that has movie kiosks and a small mail and Internet-delivered content business. But its brick and-mortar business is dead.
Dollar Thrifty Automotive Group, the car rental company, is for sale. Hertz (NYSE: HTZ – News) is a potential buyer, as is Avis Budget (NYSE: CAR – News). Each of the larger car rental firms would use the Dollar Thrifty business to expand their market share. That does not mean that they would keep the brand. The current company is not much of a business. It made only $27 million last quarter on revenue of $348 million. It has more than $1.5 billion in “debt and other obligations.” The number of vehicles that Dollar Thrifty operates at any one time is only 95,000 compared to 420,000 for Hertz. The firm’s customer base and some of its locations may be valuable, but Dollar Thrifty can’t compete with Avis and Hertz. A decade ago, the car rental industry was able to support six independent brands. A significant drop in business and leisure travel and sharp competition among the companies has already caused the creation of Avis Budget. Dollar Thrifty will be the next casualty of the industry’s consolidation.
T-Mobile, the U.S. wireless provider, is owned by telecom giant Deutsche Telekom (DTEGY.PK – News). It is the No.4 cellular company in an American market that only supports two really successful firms — AT&T Wireless and Verizon Wireless. Even the third-largest company in the market — Sprint-Nextel (NYSE: S – News) — has 50 million customers. T-Mobile had 34 million customers at the end of last year. T-Mobile only had a profit of $306 million in 2009. That was down from $483 million in 2008. T-Mobile not only faces three larger competitors, it also has to begin to offer 4G service to compete with Sprint’s new WiMax service and LTE-based products from AT&T (NYSE: T – News) and Verizon (NYSE: VZ – News). T-Mobile may seek a partner to offer a 4G network, but there are no super-fast broadband networks likely to be finished before its three rivals offer the service. As it now stands, T-Mobile has no future in the U.S. A merger with Sprint-Nextel has been mentioned several times. The combined company would have a customer base about the same size as AT&T or Verizon. And the transaction would probably make Deutsche Telekom a large owner of the combined operation. Another alternative would be a merger with Virgin Mobile. Maybe Deutsche Telekom will just change the firm’s name.
Moody’s Corp. may have the name with the largest negative brand equity in the U.S. Scandals about the company’s rating of mortgage-backed securities and allegations that the firm compromised it ratings process to get business have ruined the company’s image. Moody’s is more than 100 years old, but the reputation it built over those years is irretrievably lost. There is a chance Moody’s could be ruined by civil actions, four of which are pending, and by charges brought by the U.S. government. Overseas authorities may bring a number of actions against the company as well. Moody’s activities are almost certainly to be more regulated, which will squeeze margins and hurt sales. Moody’s may end up selling its accounts to a new rating company, which would probably hire many of its employees. Pacific Investment Management Co. and other institutional investors have talked about taking on some if not all the roles that the current rating firms play. Research houses like Alliance Bernstein (NYSE: AB – News) could also take on some of those rolls. Part of Moody’s operation may stay alive, but there is not much left to salvage in the brand.
BP: The case against the BP brand is not so much that the company will enter bankruptcy. It is that BP may end up breaking into pieces for its own sake. This may be to put the liabilities for the Deepwater Horizon spill into a company that also holds escrow capital to cover the huge costs of clean-up and suits. BP may also want to separate its successful refining operations from its exploration business, or recreate an American- based company similar to BP America, which existed for two decades. A restructuring of BP would also allow the firm to take a badly crippled brand and give the oil operation a new name — much as it did when it changed its name from British Petroleum. The second time may be the charm.
RadioShack is one of the oldest retailers in the U.S. It was founded in 1921 and in the early 1960s was purchased by Tandy Corp. The Tandy name was used for some of Radio Shack’s retail stores. RadioShack is currently a takeover target. There have been rumors that the company may be taken private via a leveraged buyout or purchased by Best Buy (NYSE: BBY – News), probably for its locations. Best Buy would certainly not keep the RadioShack brand because it is considered downscale and does not have the reputation for quality products and service that Best Buy enjoys. RadioShack has already begun to rebrand itself as “The Shack,” an indication that it knows the older brand is a burden.
Zale Corp. was founded in 1924 by the Zale brothers. It was one of the earliest retailers to offer the ability to buy items on credit. By 1980, Zale had revenue of over $1 billion. In 1992, Zale filed for bankruptcy and by the end of that decade, its revenue was $1.3 billion — about the same as it is today. Zale has been at death’s door for some time. Its market value is down to $48 million. The company is trying to turn itself around, but most experts are not convinced. The company recently made the Forbes list for firms with extreme financial risk. In the last quarter, the retailer lost $12 million on revenue of $360 million. Zale is also in a very crowded market that includes retailers as large as Wal-Mart (NYSE: WMT – News). Golden Gate Capital recently put money into Zale to buy it time. New money may defer the point at which Zale goes under, but it won’t prevent it.
Merrill Lynch may have been acquired, but that will not keep it safe. In fact, quite the opposite is true. Banks and other large financial services firms have a habit of buying large retail brokerage houses and then changing their names. Shearson is gone. So is EF Hutton and Prudential. In most cases the parent company wants to put their own names on the door. That is very likely to happen to Merrill Lynch, which was at one point the largest full-service broker in the U.S. Merrill is now owned by Bank of America Corp. (NYSE: BAC – News), and the buyout spawned a number of scandals that kept Merrill’s name in the paper for weeks and did a great deal to harm its name with customers. Bank of America will follow a time honored tradition, and Merrill Lynch will become BofA Investment Management.
Kia Motors Corp. is one of the two car brands of Hyundai of South Korea. It has always been a marginal brand. Its stable mate, Hyundai USA, has a reputation for high quality cars like the Sonata and Genesis. Kia sells “low rent” cars and SUV nameplates like the Sorento and Rio. As GM and Ford (NYSE: F – News) have already discovered, it is expensive to maintain multiple brands and storied car names, including Pontiac, Saturn and Mercury, are disappearing. Most Kia cars sell for $14,000 to $25,000. Hyundai has several cars in the same price range. Hyundai’s Sonata has quickly become one of the best-selling cars in America, and its Genesis flagship model competes with mid-sized BMWs and Mercedes. The parent company will take a page from several other global car companies and dump its weakest brand.
U.S. Banks Risk ‘Untold Problem’ as Muni Debt Swells
By Dakin Campbell
(Bloomberg) — Citigroup Inc., State Street Corp. and U.S. Bancorp are among U.S. banks whose municipal bond holdings have reached a 25-year high just as state budget deficits swell to $140 billion, the most since the start of the recession.
Commercial lenders added more than $84 billion to their holdings since 2003, according to the Federal Reserve, pushing total investments to $216.2 billion at the end of the first quarter. Bank regulators and ratings companies are ramping up scrutiny of banks most at risk of being forced to raise more capital should debt prices slide.
“There is a huge untold problem here,” said Walter J. Mix III, a former commissioner of the California Department of Financial Institutions who closed 30 banks during the last banking crisis in the 1990s. “The economics lead to the conclusion that there will be downward pressure on these bonds.”
At Cullen/Frost Bankers Inc., the biggest Texas lender, holdings of municipal debt exceeded Tier 1 capital, a key measure of a bank’s ability to absorb losses, by $491 million at the end of the first quarter, data compiled by Bloomberg show. For State Street, based in Boston, the holdings make up 50 percent of Tier 1 capital. U.S. Bancorp, the Minneapolis lender, has a ratio of 28 percent. It’s 11 percent at Citigroup, the data show.
Municipal Bond Yields
Default speculation and a move by investors to the safest securities drove municipal bond yields to a 13-month high relative to U.S. Treasuries in the first half of the year. Now, the Federal Deposit Insurance Corp. has asked analysts to look into the issue, according to spokeswoman Michele Heller.
The 9.5 percent U.S. unemployment rate and slump in property prices have slashed local governments’ ability to pay bills. Billionaire investor Warren Buffett, speaking at a June 2 hearing of the Financial Crisis Inquiry Commission in New York, predicted a “terrible problem” for municipal bonds. Buffett has said a U.S. state facing default may need a federal rescue.
Analysts and investors remain divided about the level of risk. Lenders hold just 8 percent of the $2.8 trillion state and local government debt market, and municipal bonds are only about 2 percent of total bank assets, according to the Fed.
‘Train Wreck’
“The open issue is whether it’s a slowly emerging train wreck,” said Jeff Davis, an analyst at Guggenheim Securities LLC, a unit of Guggenheim Partners LLC, whose executive chairman is former Bear Stearns Cos. Chief Executive Officer Alan D. Schwartz. “It’s hard to paint all general obligation and all revenue bonds with the same brush. The portfolios won’t go to zero.”
Municipal defaults are a slender risk, according to Moody’s Investors Service, which said in a February report that the investment-grade rate during the past four decades was 0.03 percent, compared with 0.97 percent for similar corporate issues. Investors eventually recoup an average of 67 cents on the dollar for defaulted municipal bonds.
While the historical default-rate risk for municipal debt is below corporate obligations, sudden declines in prices have already created losses at some banks.
Citigroup had an unrealized loss of $1.8 billion in the third quarter of 2008, when the municipal market sank 3.8 percent, the biggest quarterly decline since 1994, company filings and Bank of America Merrill Indexes show. The loss was deducted from the firm’s equity.
Citigroup
“Citi’s exposure to the municipal market is of the highest quality,” Danielle Romero-Apsilos, a spokeswoman for the New York-based firm, said in a statement. “We conduct rigorous stress tests under a variety of scenarios and are comfortable with our position.”
Citigroup had the largest municipal holdings among the biggest banks as of March 31, with $13.4 billion of state and local government bonds, according to FDIC call reports. That’s down from $13.8 billion at the end of last year. Bank of America Corp. held $8.5 billion, Wells Fargo & Co. owned $7.6 billion and JPMorgan Chase & Co. held $4.5 billion. Each accounted for less than 8 percent of Tier 1 capital, according to the FDIC.
Bank of America, based in Charlotte, North Carolina, has made “significant progress” boosting capital and reducing risk-weighted assets, spokesman Jerry Dubrowski said. The lender trimmed its municipal investments by more than $800 million in the first quarter. JPMorgan spokeswoman Jennifer Zuccarelli didn’t return a call for comment.
Wells Fargo
Wells Fargo, based in San Francisco, boosted its municipal holdings by more than $2 billion in the first quarter, data compiled by Bloomberg show. The investments are in municipalities “we know very well,” Chief Financial Officer Howard Atkins said on May 13.
State Street, the second-largest independent custody bank, owned $6.2 billion of state and local government debt at the end of March, the data show. State Street is “very comfortable” with its portfolio and has had no material credit issues, spokeswoman Carolyn Cichon said. At Minneapolis-based U.S. Bancorp, which owned $6.6 billion of municipal bonds, spokeswoman Jennifer Wendt also declined comment.
Cullen/Frost, which says it’s the only one of the 10 biggest Texas banks to survive the 1980s savings-and-loan crisis, is “extremely comfortable” with the municipal investments, CFO Phillip Green said in a July 1 interview.
$1 Billion in Bonds
The 142-year-old lender, based in San Antonio, bought $1 billion of municipal bonds in the 12 months through February, Green said that month. Most were issued by Texas school districts and insured by the state’s Permanent School Fund guarantee program, he said in last week’s interview.
Municipal debt gained 2 percent in the second quarter underperforming Treasuries by 2.7 percentage points, according to Bank of America Merrill indexes. In 2009, state and local government debt rose 14.5 percent.
U.S. states are likely to face $140 billion in cumulative budget gaps in the coming year, according to the Center on Budget and Policy Priorities. Last year, 187 tax-exempt issuers defaulted on $6.4 billion of securities, the most since 1992, according to data from Distressed Debt Securities in Miami Lakes, Florida.
“It’s a market where it’s clear that the underlying fundamentals are lousy,” said Michael Aronstein, chief investment strategist at Oscar Gruss & Son Inc., a New York- based brokerage. “People can say fundamentals don’t matter but I’ve been doing this for 32 years. They do.”
–With assistance from Dunstan McNichol in Trenton, New Jersey and William Selway in Washington, D.C. Editors: Alec McCabe, David Scheer.
To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net
To contact the editor responsible for this story: Alec McCabe at amccabe@bloomberg.net.
The Russians next door: A ‘sexy’ spy to ‘great tenants’?
‘Such a nice couple’
AFP – Getty Images used spies next door
This drawing dated June 28, 2010 shows five of the 10 arrested Russian spy suspects in a New York courtroom.
It’s a tabloid editor’s dream come true: Ten people are accused of being undercover Russian spies, and one of them is even photogenic enough to deserve her own slide-show (see The New York Post’s tribute to what they are calling“Sexy Russian Spy Anna Chapman”here).But for the neighbors of the ten people arrested throughout the Northeast, it was more of a nightmare. Who were these people who they had come to trust as a professor, a newspaper columnist, and an architect, among other well-respected professions?Video: FBI arrests 10 in alleged Russian spy ring“They’re such a nice couple,” Susan Coke, a real estate agent who sold a home in Montclair, N.J. to two of the suspects — who called themselves Richard and Cynthia Murphy — told The New Jersey Star-Ledger. “I just hope the FBI got it wrong.”
Information compiled by msnbc.com’s Elizabeth Chuck and Ryan McCartney.
Anna Chapman, New York, N.Y.:Chapman, 28, said she was the founder of an online real estate company worth $2 million. She said she had a master in economics, was divorced, and lived in Manhattan’s Financial District, The New York Post reported. According to the New York Daily News, Chapman is the one who figured out her alleged spy network was being monitored on Saturday, prompting the FBI to make the arrests Monday.Sources: New York Daily News, New York Post
Richard and Cynthia Murphy, Montclair, N.J.:Richard was an architect, a neighbor told The New Jersey Star-Ledger, and Cynthia had just gotten an MBA. Richard said he was from Philadelphia; Cynthia said she was from New York. She worked as a vice president at a Manhattan firm, Morea Financial Services, Politico reported. The couple lived with two young daughters, Katie and Emily, in a home on Marquette Road in Montclair that they purchased for $481,000 in the fall of 2008. The two had come to the U.S. in the mid-1990s, first living in an apartment in Hoboken, N.J.Sources: Star-Ledger, New York Daily News, Politico
Juan Lazario and Vicky Palaez, Yonkers, N.Y.Neighbors said they knew Juan to be an economics professor at a college in New Jersey, and Vicky to be a columnist for New York’s Spanish-language newspaper, El Diario La Presna. They lived with two sons, according to the New York Daily News.Source: New York Daily News
Michael Zottoli and Patricia Mills, Arlington, Va.The husband-and-wife pair lived in Seattle before they moved to Arlington, Va. in October 2009. Zottoli, 40, said he was a U.S. citizen who was born in Yonkers, N.Y., and Mills, 31, said she was a Canadian citizen. Records reveal that the two moved around several times between 2002 and 2009.“They were the nicest people,” one former resident manager said of the two, who another neighbor said had a young son and a new baby. “In fact, I wish they had stayed on as tenants. They were really good tenants.”When their Seattle apartment was searched in February 2006, FBI agents reportedly found password-protected computer disks that contained “stenography program employed by the SVR.”Sources: KOMO-TV, Washington Post
Donald Howard Heathfield and Tracey Lee Ann Foley, Cambridge, Mass.The “Boston Conspirators,” as the FBI dubbed them, lived with their two teenage boys in Cambridge’s Harvard Square, according to the Boston Herald. He had received a master’s in public administration from Harvard in 2000 and worked as a consultant for a Cambridge-based consulting firm – a job that allegedly enabled him to contact a former high-ranking U.S. government national security official. The two were arrested at their Trowbridge Street apartment.“I’m absolutely floored,” Paul Hesselschwerd, president of Global Partners Inc. where Heathfield worked since 2000, told The Boston Globe. “He’s a good person. He’s lived in the United States for a long time. We’re just completely shocked.’’Craig Sandler, a former classmate of Heathfield, told The Boston Globe the alleged Russian spy was friendly and intelligent.“It never crossed my mind that he might be a spy,” Sandler said Tuesday. “But it’s not completely flabbergasting. He seems like a guy who would make a pretty good spy.”Sources: Boston Globe, Boston Herald, Harvard Crimson
Mikhael Semenko, Arlington, Va.Semenko, 28, was a travel specialist at Travel All Russia LLC, according to a spokesman from the company based in Arlington, Va.The alleged spy began working for Travel All Russia in 2009 and was described as a friendly and diligent worker who had a strong command of several languages, including Russian (native), English, Spanish, and Mandarin Chinese, according to a statement released by the company after the arrest. A LinkedIn profile that says Semenko worked at Travel All Russia indicates he was particularly interested in non-profits, think tanks, public policy and educational institutions. Semenko was based in the Washington, D.C., area at the time of his arrest and attended or was attending Seton Hall University, the LinkedIn profile says.According to Britain’s Daily Telegraph, FBI officials apparently met Semenko on Saturday just blocks from the White House, at the intersection of 10th and H Street. “Could we have met in Beijing in 2004?” the undercover agent asked. “Yes, we might have but I believe it was in Harbin,” Semenko reportedly replied. See below for other code words and phrases the suspects used.Sources: Daily Telegraph, LinkedIn
Code words, phrases suspects used Following are among the phrases used by the alleged agents, their handlers and, deceptively, by U.S. counter-espionage officials in exchanges designed to verify a contact’s identity.”Excuse me, but haven’t we met in California last summer?”"No, I think it was the Hamptons.”"Could we have met in Beijing in 2004?”"Yes, we might have, but I believe it was in Harbin”"Excuse me, did we meet in Bangkok in April last year?.”"I don’t know about April, but I was in Thailand in May of that year.”Source: Reuters
Russian spies: High-tech gear, plus old Cold War methods
The accused Russian spies arrested this week used a combination of very advanced methods and equipment as well as old-style spycraft like the ‘dead drop.’
FBI agents outside 35B Trowbridge Road in Cambridge, Mass., a residence owned by Donald Heathfield and Tracey Foley. Heathfield and Foley were arrested Sunday by the FBI on allegations of being Russian spies.
(Richard Stanley/AP)
By Peter Grier, Staff writer
posted June 29, 2010 at 7:44 pm EDT
Washington —The accused Russian spies arrested by the US on Monday used a wide range of espionage techniques. Some were high tech, such as steganography – communication via encrypted text embedded in web site photos. But many were Cold War-era golden oldies, such as brush-passes, in which agents hand off identical bags in crowded places; radiograms, which involve burst transmissions over shortwave transmitters; and that old favorite, the dead drop.
Why is it called a “dead” drop? Because it involves one person dropping off something at a pre-arranged location, and a second person picking it up after the first has left. If the two meet face-to-face it’s called a live drop.
Anyway, traditional methods were a hallmark of the KGB during the years of the Soviet Union. That appears to have persisted with the SVR, Russia’s intelligence service. Here are some highlights of that long history of tradecraft, as recounted by FBI historians.
THE HOLLOW NICKEL. In 1953 the FBI obtained a curious artifact – a hollow nickel that contained a microphotograph of ten columns of typewritten numbers. A newsboy had received the nickel in change while collecting from a customer.
The hollow nickel had been made from two coins with a tiny hole drilled through the “R” in the word “Trust.” For four years, US intelligence tried to decipher the numbers, and solve the mystery of the nickel, to no avail.
Finally, in 1957, a key appeared in the person of Reino Hayhanen, a Soviet spy who defected to the US rather than return to the USSR. The KGB had supplied Hayhanen with a hollow Finnish coin for dead drops that was marked by the same tiny hole as the nickel. With this hint the FBI finally decrypted the message, which turned out to be a welcome-to-the-US letter for Hayhanen from his Moscow superiors.
Hayhanen eventually led agents to one of his spy masters in the US, Col. Rudolf Abel. Convicted of espionage, Col. Abel was swapped in 1962 for captured US U-2 pilot Gary Powers.
WALKIE-TALKIES AND FAKE BRICKS. In 1970 a Grumman aircraft engineer who lived in the New York area struck up a friendship with a Russian who introduced himself as Sergey Petrov. Petrov claimed to be a translator of scientific documents at the UN.
Petrov was quite interested in the engineer’s work on the design of the new F-14 Navy fighter. He asked for any documents related to the plane – and said he’d pay the engineer a stipend if things went well.
The engineer went to the FBI. Over the next few months, he and Petrov met at Long Island restaurants for document exchanges. The Soviet spy gave his new friend a special camera, so he could bring pictures instead of actual paper. Eventually he outlined a plan in which the engineer would place microphotos in fake bricks made of plaster of Paris. Then the engineer would contact Petrov on a walkie talkie and tell him when he had dropped the brick at a location near the Tappan Zee Bridge, north of the city. This would eliminate the need for dangerous face-to-face meetings.
The FBI arrested Petrov shortly thereafter. He was indicted on espionage charges in July, 1972. In August of that year, the White House told the courts to drop the charges. Petrov was freed, and he returned to the USSR.
“It was decided by top US officials that this dismissal would best serve the national and foreign policy interests of the United States,” concludes an FBI summary of this case.
RAMON’S HOMEMADE TRADECRAFT. Robert Hanssen was a veteran FBI counterintelligence agent who spied for the Soviet Union, and later Russia, from 1979 to 2001. His acts did dreadful damage to US security, and caused the death of a number of US intelligence assets inside the USSR.
One of the reasons he was able to carry out 22 years of such high-level espionage was that he was careful to conceal his identity and place of work from his Soviet handlers. That way he could not be turned in by any US mole within the KGB.
The Soviets knew him by the code name “Ramon Garcia”.
Hanssen began his career as a turncoat by writing the KGB a letter. He subsequently refused all Soviet offers to meet in a third country, and all Soviet tradecraft. He was an FBI counterintelligence agent, after all, and figured he would survive best by designing his own routines.
Hanssen never showed any outward signs that he was receiving large sums of money, as he knew that might raise FBI suspicions. He set his own dead drop locations, which included a footbridge near Vienna, Virginia, a wooden utility pole near a Vienna bus stop, and the top of a “Foxstone Park” sign in the same area.
An FBI hunt for a suspected internal leaker finally discovered Hanssen after years of pursuing false leads. As then-FBI director Louis Freeh pointed out when the arrest was announced on February 20, 2001, Hanssen’s homemade tradecraft had been so effective that American counterintelligence learned his real name before his Russian spymasters did.
“They are learning of it only now,” said Director Freeh that day.
Hanssen, aka “Ramon,” is now serving a life sentence at the Supermax federal penitentiary in Florence, Colorado.
WASHINGTON – In the rapid-fire spy swap, the United States and Russia worked together as only old enemies could.
Less than two weeks after the FBI broke the spy ring in a counterintelligence operation cultivated for a decade, 10 Russian secret agents caught in the U.S. are back in Russia, four convicted of spying for the West have been pardoned and released by Moscow, and bilateral relations appear on track again.
In describing how the swap unfolded, U.S. officials made clear that even before the arrests, Washington wanted not only to take down a spy network but to move beyond the provocative moment.
So the U.S. made an offer. Russia was ready to deal.
Channels of communication that once coursed with world-shaking superpower crises were reflexively put into play. Moscow and Washington not only have a history of nuclear-tipped tension but also long experience keeping those tensions in check.
Just imagine if the U.S. had been caught up in a spy flare-up with Iran instead.
“This case has been done with electrifying speed,” said John L. Martin, who oversaw Cold War espionage prosecutions and trades during a 27-year career at the Justice Department. “I’ve never seen so much pressure to do it quickly.”
The detailed case against the network of secret Russian agents was brought to the attention of the White House in February, officials said. On June 11, President Barack Obama was briefed on the matter.
Well before FBI agents moved against the operatives late that month, Washington had in mind that they might become bargaining chips to free Russians imprisoned for betraying Moscow and helping the West.
The U.S. arrests were not made to facilitate a swap, said a U.S. official, speaking on condition of anonymity to discuss matters of intelligence. Rather, they were precipitated, at least partly, by the plans of several of the Russians to leave this country this summer. He said that as the time approached to take down the ring, the question officials asked each other was, “Once the arrests take place, what do we do?”
CIA and FBI officials decided that because the sleepers had been observed and tracked by U.S. agents for so long, there was nothing to be gained or learned from them, the official said. Once in custody, the operatives “provided an opportunity for us to get something from the Russians.”
The idea of a swap advanced.
The CIA was assigned to make the initial approach, “testing the waters, and following through,” the official said. About a day after the arrests were made, the CIA contacted the Russian service to say, “We had a proposal to resolve the situation.”
The Russians, despite crying foul in public over the arrests, were ready to privately listen.
That set the stage for three phone calls between CIA Director Leon Panetta and Russia’s spy chief, Mikhail Fradkov. Panetta identified the four prisoners being held in Russia that the U.S. wanted to free, several U.S. officials said.
“I think the U.S. government had its end game lined up when it started this process,” said attorney Peter Krupp, who represented Donald Heathfield, one of the U.S. defendants.
“The Justice Department and perhaps the State Department moved mountains that couldn’t be moved by local officials to orchestrate a meeting between my client in Boston on Saturday of the Fourth of July weekend,” said Krupp.
Daniel Lopez, who represented defendant Mikhail Semenko in the case, says he has handled over 1,000 criminal cases “and I’ve never seen one move this quickly.”
On Monday, four days after becoming Semenko’s court-appointed lawyer in Alexandria, Va., Lopez got a phone call from a federal prosecutor telling him that “it would be in your client’s best interests to agree to come to New York as fast as you can because either he is ‘on the bus’ when it’s leaving or he is not.”
“I said ‘Do we have a plea agreement in this case?’ And he said ‘yes,’” Lopez recalled. But Lopez had no idea yet that his client was to become part of a spy swap.
All 10 defendants were assembled in New York from various jails to enter guilty pleas, complete the swap arrangements and be deported.
Once Russian diplomats talked to defendants or their lawyers to lay out what was going on, it became clear from their side as well that the operatives were merely pawns in a chess game controlled by Washington and Moscow.
Lopez said two Russian diplomats approached him Thursday as his client waited to plead.
“I said, ‘What is going to happen to my client’s belongings?’” and one diplomat replied, “It’s not important.”
“I said, ‘Well, what is important is for my client to know when he is going to leave.’ One of them said, ‘He’s leaving today … as soon as this is over, we’re going to the airport, straight to Europe and from there to Russia.’”
“I was amazed,” said Lopez.
Robert Krakow, attorney for Mikhail Anatonoljevich Vasenkov, said he was surprised to learn Russian officials had met his client without his knowledge. “I was not happy about it,” he said. “But the last thing I want to do is have my needs as a lawyer intrude upon events that are unfolding.”
Prosecutors sent Krakow a plea deal letter close to what was eventually agreed upon. When he first told his client, Vasenkov rejected the idea of going to Russia.
“He said, `No, I’m not going. What am I going to do in Russia?’” the lawyer recalled. Vasenkov, 66, went by the name Juan Lazaro, falsely claimed he was South American and lived in a Yonkers, N.Y., home paid for by Russian intelligence.
“It became clear that the choices were limited,” Krakow went on, and his client agreed to go — promised support for himself and his family in their new life. John Rodriguez, lawyer for Vasenkov’s wife Vicky Pelaez, said the couple had 24 hours to accept the “all-or-nothing” deal to go to Moscow or face years behind bars in the U.S.
Krakow said when he met the Russian representatives, one of them told him his “mission was to get this done.”
“We didn’t like him,” Krakow said. “He was very heavy-handed. It was sort of like the imperative: `This is what we will do.’ His manner was: `This is what’s going to happen.’”
And that is what happened with all 10, leaving only one pawn eluding the chess masters, at least for now. He is Christopher Metsos, on the run after posting bail in Cyprus.
Lakers’ NBA title caps a lucrative month for sports business
It didn’t hurt that the Lakers were up against their rivals, the Celtics, for the NBA title. But it isn’t just ABC and the NBA that are scoring financially. There’s hockey, golf, tennis, and the World Cup, too.
Los Angeles Lakers guard Kobe Bryant reacts as time runs out in Game 7 of the NBA basketball finals, Thursday, June 17, in Los Angeles. The Lakers won 83-79.
(Mark J. Terrill/AP)
By Mark Trumbull, Staff writer
posted June 18, 2010 at 3:59 pm EDT
June is turning into a high-scoring month for the sports business – punctuated by the nail-biter series that made the Los Angeles Lakers NBA champions on Thursday night.
By lasting for seven games, and with a finish that hung in the balance until the final seconds, the basketball series became an ad-revenue winner for host network ABC. It didn’t hurt that the Lakers were up against the Boston Celtics, making it a rematch of one of the most storied rivalries in pro sports.
“It was a terrific back and forth series,” says Andrew Zimbalist, a Smith College economist who follows the sports business. “It’s good for the buzz … of the NBA.” Although a single event like this doesn’t catapult basketball to a new place in American hearts and wallets, the excitement came at a helpful time, when sports are struggling with some of the same economic challenges as other industries, he says.
A parade through L.A. in coming days will cap the Lakers’ success. But it isn’t just ABC and the National Basketball Association that are scoring financially and with fans.
Consider what else has been going on this month in the world of sport:
• Hockey’s Stanley Cup drew a big audience for NBC as the Chicago Blackhawks bested the Philadelphia Flyers in six games.
• In tennis, Spaniard Rafael Nadal won his fifth French Open in six years, defeating the opponent who had knocked him out of the event a year earlier.
• In golf, the signature test of skill on American soil – the US Open – is now under way at one of the sport’s most famous and scenic venues, a reshaped Pebble Beach course on the California coast. OK, like it or not the plot line also includes the comeback bid by a tarnished Tiger Woods, but there’s some good golf happening (with final rounds on NBC this weekend).
Oh yeah, and a little thing called the World Cup is alive and kicking in South Africa. Early in the tournament, there’s already been plenty of excitement along with too much noise from those weird vuvuzelas. The US team managed a 2-2 tie in a game against Slovenia Friday.
It’s not clear if the soccer matches (or really “football” to most citizens of the planet) will be a financial win for the host nation, but plenty of advertisers are trying to cash in. One example: Sony, which gets exposure when people click for video clips on the FIFA (Fédération Internationale de Football Association) website. The US broadcasting is largely on ESPN, which is in the same corporate family as ABC.
The Lakers-Celtics championship was a showcase for some great basketball, pitting L.A.stars like Kobe Bryant and Pau Gasol against the likes of Paul Pierce and Kevin Garnett. By going a full seven games, the series raked in extra ad revenue for ABC. And although Cleveland has plenty of fans sorry that the Cavaliers and LeBron James didn’t make it to the final, arguably the classic rivalry between teams from the East and West Coasts helps to boost the sport’s profile.
According to preliminary numbers, the final game of the NBA series had the biggest TV viewership of any NBA game since 1998, when Michael Jordan led the Chicago Bulls against the Utah Jazz.
Similarly, the National Hockey League basked in its Stanley Cup final. The NHL said the season was its best ever for business and that the championship drew “the largest audience across all platforms in the history of the sport.”
Of course, sports can involve its share of heartbreak, too. The baseball season is having its usual share of excitement, but the sport’s highest-profile moment in June was not a crowd-pleaser. A self-confessed bad call by umpire Jim Joyce stirred a frenzy of debate over whether Major League Baseball should initiate wider use of instant replays to reduce the potential for game-changing mistakes by the umps.
In this case, Detroit Tigers pitcher Armando Galarraga saw what would have been the 21st “perfect game” in the sport’s history (no batter gets on base for the opposing team) in the sport’s history.
And even basketball – and the Los Angeles area – was sorry at the passing of legendary coach John Wooden, who led UCLA to 10 national championships.
As an economic force, sports are a huge business – generating $213 billion in value in the US alone, by one estimate. Basketball continues to rank lower than football or baseball in popularity among Americans. But behind soccer, it’s one of the most popular sports globally.
If the economy recovers, 2010 could be a very good year for Ford Motor Co. and General Motors Co., both of which are poised to launch new high-volume, high-mpg vehicles next year.
Cars like the Chevrolet Cruze and Ford Focus compacts, with the promise of low prices and stingy fuel consumption, seem perfectly suited to the mood of the times. Chrysler hopes to rekindle buyers’ passions with new versions of the Chrysler 300C and Dodge Charger.
Japanese and German automakers have few potential big sellers in the wings. Hyundai looks set to continue its momentum with a couple of stylish new vehicles, however.
Here’s an advance look at some of the most intriguing or significant new models coming over the next year:
CHEVROLET CRUZE: The roomy compact could be a top seller for General Motors. The Cruze looks to be competitive with stalwarts like the Toyota Corolla and Honda Civic, but Chevrolet will need head-turning fuel economy to persuade skeptical buyers to try its new small car. Look for EPA ratings above 40 mpg from Cruzes featuring a turbocharged 1.4-liter engine and six-speed automatic transmission.
CHEVROLET VOLT:
The 500-pound gorilla of next year’s vehicle introductions. Advance publicity for the extended-range electric car has been unprecedented, from the promise of a 230- mpg. EPA rating for city fuel economy to GM’s peekaboo unveiling of the Volt’s styling. If the car delivers on its promise, it could revolutionize the auto industry and change the way people think of GM. Any foul-ups will generate headlines around the world, however. “GM has to get the Volt right,” Merkle said.
CHRYSLER 300 and DODGE CHARGER:
The second generation of the last great cars Chrysler developed. They’ll be under a microscope, because the originals were so good, and because they’re the first new Chryslers since Fiat took control of the company. The cars’ styling recaptures the originality and excitement of the first Chrysler 300, and their rear-drive platforms should delight fans. Fuel economy will almost certainly be a challenge, however.
FORD EXPLORER:
America’s best-selling SUV will be replaced by a more fuel-efficient car-based vehicle, but the name could confuse some buyers. The new crossover wagon may not be rugged enough for owners of traditional SUVs, while crossover shoppers may dismiss it because they assume an Explorer must be a big, heavy SUV. “Ford has to market the new Explorer really well so people know what it is,” Hall said.
ACURA ZDX:
Honda’s luxury brand needs a hit, but its pricey new crossover faces challenges. “It’s a bold move to make an untested vehicle like that a brand’s flagship model,” said Stephanie Brinley of consultant AutoPacific. Prices for the 300-horsepower V6 crossover with the sloping roof and hatchback will start at $50,000, according to Edmunds.com. “It’s going to be a niche vehicle,” said consultant Erich Merkle of Autoconomy.com. “You lose function and form with the low roofline.”
CADILLAC CTS COUPE:
“It enhances the sex appeal of the whole Cadillac lineup,” Brinley said. The CTS sedan elevated Cadillac to the front rank of luxury brands, but the coupe still has to “earn its stripes,” said Jim Hall, managing director of 2953 Analytics. “The BMW 3-series owns the luxury coupe segment,” he said. “It’s tough to establish a new vehicle’s credibility,” he said.
FORD FOCUS:
Ford’s sophisticated global compact car is to finally go on sale in the United States. The new Focus promises to be a quantum leap better than the current model, but it will have to remain affordable to succeed. “Ford has a lot riding on the Focus,” Brinley said. “They need to prove they can be profitable with a small car.”
FORD FIESTA:
The attractive subcompact will test American buyers’ appetite for small cars. “The design is a knockout,” Merkle said. “It’s got a cute factor like the Mini Cooper, but is more affordable. It could appeal to empty-nesters as well as young buyers.”
HONDA ACCORD CROSSTOUR:
Honda’s alternative to Toyota’s sleek Venza crossover wagon attempts to meld an Accord-style nose to a Civic-like tail. The styling could be polarizing, but the car’s position as a roomy flagship to the popular Accord line should generate interest. Edmunds.com predicts prices will start at $31,500.
HYUNDAI SONATA:
Sketches of the new midsize sedan’s slinky profile show a stunning departure from today’s staid Sonata. Combined with Hyundai’s steadily rising quality scores, the Sonata could be a game-changer for the Korean brand. “It trumps the Accord and Camry’s design and could take a piece out of both of them,” Merkle said. Hyundai’s popular Tucson small crossover SUV gets an equally striking redo as the brand repositions itself upward.
JEEP GRAND CHEROKEE:
An all-new version of the vehicle that spawned the luxury-SUV craze and became an icon for its brand. The new Grand Cherokee’s sleek, modern looks and significantly improved interior are major selling points, but it faces a market that’s grown cool to SUVs. Boosting fuel economy significantly while maintaining the off-road capability of a true Jeep will be a challenge.
LEXUS LF-A:
Lexus’ first sports car, the LF-A is intended to prove Toyota’s luxury brand can go toe-to-toe with Porsche and BMW. The LF-A is expected to come in coupe and convertible models and feature a 5.0-liter V10 and sequential manual transmission. The LF-A concept debuted at auto shows in 2007, and the car’s long gestation raises some questions. “It’s been a stop-and-start program,” Brinley said. “Will it still fire the imagination when it finally arrives?”
SCION TC:
Scion has had trouble with the second generation of its cars — the xB grew bigger and less funky, while the xA failed and was replaced by the equally disappointing xD. The replacement for the sporty tC coupe could be an important indicator of whether Toyota has a coherent plan for its youth brand. “The jury’s kind of out on Scion,” Merkle said. “The tC could be a make-or-break vehicle.”
TOYOTA SIENNA:
The well-equipped minivan has become a mainstay of Toyota sales and a family favorite. “It’s a big player in the market and in American life,” Brinley said. “Minivans are still a huge segment of the market. There’s no better vehicle for hauling people.” The Sienna has a loyal following and could boost its sales further if the new model has exceptional fuel economy or unique kid-friendly features.
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Mark Phelan: phelan@freepress.com
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Visit the Freep, the World Wide Web site of the Detroit Free Press, at http://www.freep.com.
Massachusetts Gov. Deval Patrick, left, speaks with U.S. Interior Secretary Ken Salazar, right, after Mr. Salazar announced that the Obama administration has approved what would be the nation’s first offshore wind farm, off Cape Cod, during a press conference at the Statehouse, in Boston, Wednesday, April 28, 2010. The decision clears the way for a 130-turbine wind farm in Nantucket Sound off the coast of Massachusetts. (AP Photo/Steven Senne)
The Obama administration on Wednesday approved the country’s first offshore wind farm, in Nantucket Sound off the Cape Cod coast, overriding protests from some environmentalist groups and local residents.
Interior Secretary Ken Salazar said he approved the project on the condition it was scaled back from 170 to 130 wind turbines and that additional environmental and historical studies be completed.
“Cape Wind will be the first U.S. offshore wind farms,” Mr. Salazar said at a press conference in Boston where he was joined by Massachusetts Gov. Deval Patrick, Democrat and a supporter of the project. “It will be the first of many projects up and down the East Coast.”
The Interior Department had vowed to make a decision by the end of April on the hotly contested nine-year-old proposal.
President Obama had not said publicly whether he supports the project, despite his green-energy agenda that includes reducing U.S. dependence of foreign oil.
The project has been divisive in Massachusetts. The late Sen. Edward M. Kennedy, a friend of Mr. Obama whose family compound is in the area, did not support the plan. Critics are concerned about the project harming the natural habitat and historical sites.
Mr. Patrick said construction will begin within a year.
States along the East Coast closely watched Mr. Salazar’s decision with more offshore wind energy projects in the pipeline.
Busy Bee Bakery Melrose - Elin Agustsson held up one of her signature cupcakes in her new Busy Bee Bakery in Melrose. A loan from East Boston Savings Bank helped Agustsson open the bakery. - (John Tlumacki/Globe Staff)
Massachusetts small businesses, seeing prospects improving, are borrowing more money through government loan programs to expand, hire, and start ventures, providing another sign that the state’s economic recovery is gaining traction.
Borrowing through the US Small Business Administration’s primary guaranteed loan program has more than doubled in Massachusetts over the past year, and is on track to match levels not seen since 2005. The loan activity in Massachusetts is also among the most robust in the nation: Only eight other states have had more activity over the past several months, according to the agency.
“SBA activity is a barometer of the economy, and small businesses’ access to capital,’’ said Bob Nelson, director of the agency’s Massachusetts office. “We’re seeing more optimism, more choices for businesses to get capital, and more competitiveness among lenders. There’s certainly a lot more work to be done, but we’re seeing some positives.’’
Credit has been a critical issue for state and national economies, and particularly for small businesses, a major generator of new jobs. In the wake of the financial crisis and deep recession, many banks became reluctant to lend, preferring to hold onto capital they might need to offset bad loans and weather the downturn. Many businesses, in turn, were reluctant to borrow and add debt when the economy was sliding.
“The problem has not been a lack of credit, but a lack of sales and economic activity to support that credit,’’ said Bill Vernon, Massachusetts director of the National Federation of Independent Business, a small business advocacy group. “Now, I think, we’re heading in the right direction. It’s bumpy and inconsistent, but there are more companies doing better than they were a year ago.’’
As the outlook has improved, so has SBA lending. From October through the end of March, the first six months of the federal fiscal year, Massachusetts lenders made 923 SBA loans totaling $142.3 million, compared with 443 loans worth $61.8 million during the same period in fiscal 2009.
SBA loans — commercial loans from banks that are mostly guaranteed by the US government — represent only a small slice of small business lending. In March, Massachusetts banks had more than $9 billion of small business loans on their books, down slightly from nine months earlier, according to the Federal Reserve Bank of Boston. Still, the rebound in SBA lending suggests a change in conditions. As recently as last fall, some Massachusetts businesses were complaining that they couldn’t even get SBA loans through local banks.
In addition to the surge in SBA lending, the number of lenders making such loans has also jumped in recent months, to about 120 from fewer than 90 in the same period last year.
Among the new lenders is East Boston Savings Bank, which has made nearly $2 million in SBA loans since October, according to the agency. One of those loans was for up to $300,000, and went to Elin Agustsson. Two weeks ago, she opened the Busy Bee Bakery near a Melrose commuter rail station, and created 10 new jobs — three full-time and seven part-time. Agustsson, 51, said she had dreamed for years of starting her own bakery, and decided the time was right, despite a still shaky economy.
“Even in a recession, people still need to eat,’’ Agustsson said. “The Obama administration is pushing banks to lend, and banks are looking for people, people they can count on.’’
A number of factors have contributed to East Boston Savings’s move into the small business market, including federal stimulus legislation that increased SBA guarantees to up to 90 percent for most loans, from 75 percent, said Richard Gavegnano, East Boston Savings’s chief executive. Another factor, he said, was the struggle of large national banks hurt in the subprime mortgage meltdown and financial crisis. The bank, with 19 branches in Suffolk County and on the North Shore, has added an executive who focuses specifically on SBA lending.
“With the message clear that government wants to facilitate small business lending, and the megabanks pulling back, we felt there was an opportunity,’’ Gavegnano said. “We want to participate in small business activity, and we’ve ramped up considerably.’’
Small business, which traditionally has been underserved by lenders who preferred to make larger, more profitable loans, is increasingly viewed as a growth market, local bankers said. As a result, the increase in SBA guarantees has provided incentives for some banks to break into small business lending, and for longtime participants in SBA programs to expand their lending.
For example, First Trade Union Bank of Boston, founded by the Massachusetts Carpenters Combined Pension and Annuity Funds, traditionally focused its lending on commercial real estate, bank officials said. It turned toward SBA lending last year as way to further diversify its loan portfolio, bank officials said, and has made more than $6 million in small business loans since October, according to SBA data.
Eastern Bank, the state’s top SBA lender, increased its lending eightfold over the past year, writing more than 170 loans valued at $8.5 million between October and March, according to SBA data. “The fact that we have SBA behind these loans allows us to be more confident and get credit into the hands of small businesses,’’ said Joe Riley, the Boston bank’s executive vice president of retail and business banking.
In many ways, the reliance on the SBA guarantees shows that the economy, credit, and confidence are not back to normal after the historic downturn of the past two years. Still, bankers said, the increased lending demonstrates that conditions are improving. Earlier this week, a Federal Reserve survey found that many New England businesses across several sectors were reporting solid sales and customer demand.
Such companies include Cercone Brown & Co., a Boston public relations and advertising firm. The nine-year-old company, which employs 22, recently received a $250,000 SBA loan through Eastern Bank to help it expand into a new office and nearly double its space. The company has also added two employees and expects to hire more in the coming months.
“When you get more business, you have to move into a bigger office. You need people. You need to invest in new programs,’’ said Len Cercone, a founding partner. “Small businesses are entrepreneurial, and when you add a little capital, you can turn that entrepreneurial spark into a fire.’’
‘Given the importance of economic development, … I have expanded my thinking,’ Robert A. DeLeo said.
By Matt Viser Globe Staff / September 19, 2009
House Speaker Robert A. DeLeo expressed strong support yesterday for bringing resort-style casinos to Massachusetts, one of the clearest indications yet that lawmakers are poised to expand gambling as they seek fresh revenues in a down economy.
In a separate speech yesterday morning, Senate President Therese Murray also made the case that Massachusetts should legalize casinos, asserting that they would bring hundreds of new jobs and capture money currently going to Foxwoods and Mohegan Sun in Connecticut.
The comments by DeLeo and Murray put the state’s top three political leaders on similar ground in support of resort-style casinos for the first time as the Legislature plans to begin considering a major bill as early as next month.
DeLeo has been a supporter of expanded gambling, but in the past has put an emphasis on installing slot machines at racetracks instead of building resort-style casinos complete with amenities such as hotels, shops, and golf courses.
“Given the importance of economic development, as well as the vital need for revenue, I have expanded my thinking,’’ DeLeo said in an address in Waltham to a meeting of Associated Industries of Massachusetts. “In addition to my backing of slots, I now support resort casinos.’’
At about the same time, Murray, speaking to the Plymouth Area Chamber of Commerce, said: “The reality is that hundreds of millions of dollars are going to Connecticut casinos from Massachusetts residents every year. We need to explore ways how we can capture that revenue.’’
She said building casinos would means hundreds of construction jobs, as well as permanent employment once the casinos open.
In an interview yesterday, DeLeo said House lawmakers are drafting legislation, with hearings likely to begin next month.
A debate before the full House, he said, could begin before lawmakers recess in mid-November, but seems more likely early next year.
Governor Deval Patrick’s plan to license three resort casinos was defeated last year, in large part because of opposition by House Speaker Salvatore F. DiMasi.
With DiMasi now out of office, the debate has shifted dramatically: It is no longer about whether Massachusetts will see expanded gaming, but when and in what form.
“What has interested me all along is the jobs and the revenue,’’ Patrick told reporters yesterday in the Berkshires. “And I think there is a way to do this that maximizes the jobs and revenues and minimizes – not eliminates, minimizes – the adverse impacts.’’
Still, the casino industry has struggled mightily with the economic downturn, forcing many developers to scale back projects and focus on retaining their current properties, rather than on adding new ones.
The Globe reported Sunday that Foxwoods in Connecticut, which has long been a success story in the casino industry, laid off about 6 percent of its workforce last year and saw its revenues from slot machines plunge 13 percent in July, compared with the previous year.
Nonetheless, DeLeo cast the plan yesterday as a ministimulus package for Massachusetts, one he said would bring in new revenues and create jobs as the state seeks to recover economically.
“I’m still trying to formulate my ideas, but I’m hoping this will not just be a gaming bill, but also an economic development one,’’ DeLeo said in the interview.
“I’m just really concerned about the future,’’ he said. “I think the only way we’re going to get out of this economy is jobs, jobs, and more jobs.’’
He also said that lagging state revenues are an incentive to find a new source of money.
That argument may have more urgency after Patrick announced yesterday that he expects to make further spending cuts this year because of falling revenues.
“I don’t see an appetite for new taxes, and we don’t have much left in the rainy day fund,’’ DeLeo said. “We need to bring in new revenue.’’
He also argued that slot machines could be installed quickly at the racetracks, bringing in new revenues, while giving casino companies more time to build resort casinos, which would create new construction jobs.
DeLeo said one option that may be considered involves the licensing of two casinos, one in Eastern Massachusetts, one in Western Massachusetts, and then allowing slots at Plainridge and Raynham Park racetracks.
But when asked about installing slots at racetracks, Murray said she is “not hot on that, but I’m going to listen.’’
“That’s fast money,’’ she said in an interview. “But is it sustainable?’’
She cited Twin River in Rhode Island, which relies on slots and filed for bankruptcy in June.
She said several senators have been working on different proposals over the summer, but added that it will take time to put together the regulatory framework that would allow casino developers to begin building.
“It’s really a three-year process,’’ she said. “If we’re going to do it, we need to start.’’
Many specifics have to be worked out, including how many casinos would be licensed, whether there would be any preference given to a Native American tribe, and how potential developers would secure the rights to build.
Casino developers have been closely monitoring the gambling debate in Massachusetts and have scoured the state for land and partnerships.
Mohegan Sun in Connecticut has been laying the groundwork to build a casino in Palmer, a small community near Springfield. Several developers have looked at land in neighboring Warren.
Suffolk Downs in East Boston has been jockeying for the past two years, securing key political backing and trying to ensure that it has the inside track on a Boston-area casino. Wonderland Greyhound Park in Revere has joined with Suffolk Downs to compete for one casino license.
One potential wrinkle is the Mashpee Wampanoag Tribe, whose attempt to use its federal rights to open a casino in Middleborough has been derailed by a US Supreme Court ruling.
There are several other developers who have hired lobbyists and expressed interest in Massachusetts previously, but have not announced specific plans.
Andrea Estes of the Globe staff contributed to this report. Matt Viser can be reached at maviser@globe.com.
By RACHEL METZ, AP Technology Writer Rachel Metz, Ap Technology Writer
SAN FRANCISCO – Amazon.com Inc. said Thursday that its first-quarter profit surged 68 percent, showing that consumers are even more comfortable opening their wallets to the online retailer as the economy slowly improves. But investors were spooked by Amazon’s forecast for the current quarter and its shares fell 6 percent in extended trading.
Amazon earned $299 million, or 66 cents per share, in the January-March period. That compares with a profit of $177 million, or 41 cents per share, in the year-ago quarter.
Amazon’s earnings per share in the most recent quarter were 5 cents more than expected by analysts polled by Thomson Reuters.
Revenue rose 46 percent to $7.13 billion, well above the $6.87 billion analysts expected.
For the current quarter, Amazon expects revenue of $6.1 billion to $6.7 billion. That would be an increase of 31 percent to 44 percent over last year, but it also means Amazon’s revenue could fall below analysts’ current expectations for $6.43 billion in revenue.
“It’s an appropriate range,” Chief Financial Officer Tom Szkutak said during a conference call with reporters.
Amazon shares fell $9.09 to $141 in after-hours trading, after finishing regular trading up $3.66 at $150.09. Earlier in the day the stock hit an all-time high of $151.09, adjusted for splits.
Colin Gillis, a BGC Partners analyst, said the quarter was good, but not great, while Amazon’s stock was priced for a “stellar” report.
Revenue from books, CDs, DVDs and other media grew 26 percent to $3.43 billion. Electronics and other “general merchandise” revenue increased 72 percent to $3.51 billion. This second segment includes revenue from online shoe and apparel retailer Zappos, which Amazon bought late last year.
In North America, revenue rose nearly 47 percent to $3.78 billion. Revenue rose 45 percent to $3.35 billion elsewhere.
Szkutak said that while Amazon’s growth sped up during the quarter, it’s difficult to say how much of this is due to the economy improving.
“We still, even during the downturn, had solid growth, so it’s hard for us to break that out,” he said.
The first quarter ended right before the arrival of a major competitor to Amazon’s Kindle e-reader: Apple Inc.’s iPad tablet device. Like the Kindle, the iPad can wirelessly download books.
As in the past, Amazon declined to give details about Kindle sales. It reiterated that the device is Amazon’s best-selling product, but the meaning of that is unclear, given that the Kindle can only be bought on Amazon’s site. Amazon will start selling the Kindle at some Target stores later this month.
Baseball’s most storied rivalry gets even more heated.
It had been nine long years since the Yankees did something really objectionable in the minds of New England baseball fans.
You know, win the World Series.
But now the Yankees are the defending world champions, meaning Red Sox fans are certain to resume their regularly scheduled rancor. And this year, for the first time since 2004, those jeers should last into October.
That’s right: We’re due for another postseason meeting between the game’s economic leviathans.
In one sense, this is an unprecedented time in baseball’s biggest, haughtiest, most extravagant rivalry.
The Yankees won their first World Series in 1923 — and then 25 more by the time Boston claimed its next title in 2004. Then the Red Sox won again in ’07. Now the Yankees are back on top.
So, this is the first time the Red Sox and Yankees have each won a world title during the same three-year span.
At long last, we have a back-and-forth. For the sake of the rivalry, that’s a good thing. What fun would Michigan-Ohio State be if the same team won all the time? (OK, a bad example.)
In all seriousness, I’m curious to find out whether there will be any extra venom among Red Sox fans Sunday, when a national television audience tunes in to watch the old rivals play under the lights at Fenway Park. (Sounds like October already.)
We know New Englanders loathe the Yankees. But will the curse words bubble forth a little more often, given the built-in resentment toward any reigning champ?
The Yankees haven’t played at Fenway while holding the title belt since Sunday, Sept. 2, 2001. That’s better known as the night Carl Everett broke up Mike Mussina’s perfect game bid with two out in the ninth inning.
New York won, 1-0, thanks to Enrique Wilson’s double that scored Clay Bellinger. David Cone took the loss for Boston. Joe Kerrigan was managing the Red Sox.
You get the idea: This was a long time ago.
The rivalry reached its high ebb shortly thereafter, with those colossal seven-game encounters in the ’03 and ’04 American League playoffs. The teams have played memorable games since. But there’s no way they mattered more.
We won’t see anything like it again, because Boston’s 86-year interregnum (and all the anxiety that went with it) was a subtext to every pitch.
But the bile and the pride and the passion?
Still there.
“Nothing has transpired to diminish the intensity of the rivalry,” said Dr. Andrew Zimbalist, the sports business expert and economics professor at Smith College. “It is there in full glory.”
“The intensity will never waver,” asserted Dr. Harvey Frommer, a sports author and professor at Dartmouth College. “There is a strut in New England and a diss attitude in New York and a lot of vulgarity passed down through the generations.”
And yet … Five autumns have come and gone without the Red Sox and Yankees meeting in an ALCS. It was Boston’s fault last year; the Angels swept their division series.
The drought is hard to figure. But it’s not going to last.
This is the year.
Note the lower-case “t” and lower-case “y.” Nothing profound. Nothing biblical. Nothing about curses or spells or any of that stuff.
It’s far simpler than that: The Red Sox and Yankees are the two best teams in the majors. Sooner or later, they are going to end up in the same tavern.
And the noise will be earsplitting.
“The rivalry can’t get any more heated than it has been,” said Todd Greene, a backup catcher for the Yankees in 2001. “The Sox fans have a huge dislike for the Yankees. The Yankees fans will absolutely gloat and rub this latest championship in their face. However, Sox fans have reason to believe that they will be back in the World Series.”
The casts have changed since last year — and certainly since the teams’ last postseason encounter, back when Ruben Sierra was a Yankee and Pokey Reese a Red Sox.
The Red Sox signed John Lackey, Adrian Beltre, Marco Scutaro and Mike Cameron.
Theme: pitching and defense.
The Yankees dealt for Curtis Granderson and Javier Vazquez, signed Nick Johnson, Chan Ho Park and Randy Winn.
Theme: seasoned pros who don’t make loads of money.
Tampa Bay deserves all the positive attention it receives, but the Rays won’t be able to keep up this year. The financial chasm is simply too great to overcome. In time, we will appreciate how great, and how rare, their 2008 pennant really was.
The Red Sox are my pick to win the division and World Series — I’m a sucker for pitching and defense — but both titles will come by the barest of margins. Remember that the 2009 season series finished 9-9, and that was after the Red Sox won the first eight.
This year, the series will stand 13-12 when it’s all over. Advantage: Boston.
Taking risks during the downturn starts to pay off for local businesses
By Jenn Abelson, Globe Staff | March 28, 2010
They were last year’s risk takers. They opened doors while others shuttered them. Call them crazy — many did — for expanding during the worst downturn since the Great Depression.
Now, a year later, these five bold New England businesses are still standing. In almost every case, they have been rewarded for their decisions. And they are pretty pleased with themselves.
“It was absolutely the right move. We gained market share and saw sales grow,’’ said Chris Cheek, vice president of franchise development for Bruegger’s, the Vermont bagel chain that opened 16 shops last year and acquired a Canadian company with 125 restaurants. “A lot of competitors were hunkering down and closing. We weren’t fearful of the economy. It was the right time to grow — not to retreat.’’
For many New England companies, 2009 was a year they’d like to forget. They spent months slashing jobs and employee benefits, slicing operations, and figuring out how to survive. But several businesses embraced the recession as an opportunity not to be missed. Major store closings opened up prime real estate, and struggling landlords were willing to negotiate rents, even at coveted addresses on Newbury Street. Massive layoffs created an ample supply of talented workers, and the falloff in demand for construction made it cheaper to build new enterprises.
“The lesson learned is that opportunity always exists, even in tough times,’’ said Madison Riley, a retail analyst with Kurt Salmon Associates, a consultancy in Boston. “For established businesses and start-ups, it was a great time to make investments.’’
It wasn’t always easy. Karen Blom, co-owner of Zoar Outdoor in Charlemont, last year considered delaying a $600,000 zip line project called Deerfield Valley Canopy Tours. Instead, she pressed ahead, betting the adventure company could capitalize on people vacationing closer to home. A year later, Blom knows it was the right move. More than 7,000 people visited the canopy tours — about 2,000 above projections. And the company, despite lowering prices to $80 from the $100 it initially planned, was able to make its loan payments and turn a small profit.
“It was scary. We had a lot of sleepless nights,’’ Blom said. “But in the end, it all worked out perfectly. And I’m feeling way more confident this year.’’
Even as car sales plummeted about 20 percent and other dealers closed up shops, auto magnate Herb Chambers kept expanding his empire. He added four dealerships, including the most recent, a Kia dealership in Burlington. As he strolled the floor of the new shop recently, Chambers, looking tan and relaxed, boasted that he had stolen business from competitors and saved up to 15 percent on construction costs by building after prices had plunged.
When he spotted a car with rival Quirk Auto plates getting a new transmission at his Kia dealership in Burlington, Chambers stopped and smiled: “It makes my heart flutter when I see other dealers’ cars here. It makes you feel like you’re winning the game.’’
And he isn’t slowing down. Chambers is adding Cadillac and Hyundai to his stable for a total of 48 dealerships by year-end. The investments, he says, will pay off in the long term and allow him to increase his grip on the market when the economy recovers. Cautious consumers who are postponing purchases of new vehicles are creating pent-up demand for the next year or two as repairs become too costly or autos break down for good.
“We are really happy with what we did,’’ Chambers said.
On Newbury Street, the Swiss boutique Nespresso has found its groove selling espresso machines to consumers who want to save money by making the beverages at home. The upscale merchant had long coveted a spot on Newbury Street and grabbed the location after it was vacated by Domain Home, a home furnishings chain that went bankrupt. The Boston shop — open and doing well, according to a Nespresso spokesman — was one of two the retailer launched last year, and another three boutiques are planned this year for Miami and New York.
Several European merchants have followed Nespresso’s lead and filled empty storefronts on Newbury, where rents are down significantly. But a few blocks over, Downtown Crossing is still ground zero for the recession. The massive redevelopment of the Filene’s site has been a hole in the ground since financing fell apart, and beleaguered businesses have continued to close up shop.
William Ashmore, however, is busy trying to launch his second restaurant in Downtown Crossing, Stoddard’s Fine Foods & Ale. He had hoped to open up last April, but a litany of unexpected construction problems — the ceiling was caving in, the ventilation was insufficient, a second elevator was needed — pushed back the project and doubled the cost. Ashmore, who is an owner of the Ivy restaurant across the street on Temple Place, is approaching his 70th consecutive week of construction and preparation for the venture, styled after a pre-Prohibition pub with 25 beers on tap, a shoe shiner, and other period details.
“I’m pretty . . . nervous because we’ve bitten off a lot,’’ he said.
But Ashmore says he feels lucky that the delays saved him from opening in the worst of the recession, and gave him time to build up hype around the restaurant. Plans for a private men’s club caused an unexpected brouhaha with the National Organization of Women, and passersby keep banging on the door asking for tours and the opening date. (Maybe this week?)
When he’s not feeling the pressure of fulfilling all the promises he’s made, Ashmore, who lives in the apartment above Stoddard’s, is feeling good about the days ahead. He’s already making plans for a third restaurant in the neighborhood, a Neapolitan pizza shop, and believes Downtown Crossing has a future.
“I’m more optimistic now than I was a year ago,’’ Ashmore said. “I see how everything is finally coming together.’’
Generation after generation, giant public works projects have altered the American landscape. The Erie Canal and the transcontinental railroad come to mind. So do massive urban sewer and sanitation systems, the Tennessee Valley Authority, rural electrification, the Hoover Dam, the Interstate System, the subway networks in San Francisco and Washington, the Big Dig in Boston … and the list abruptly stops.
For the first time in memory, the nation has no outsize public works project under way. The Big Dig, with its three and a half miles of underground highways channeling traffic beneath downtown Boston, was completed in December 2007, the month the Great Recession began.
So what are we missing, exactly? Huge public works — or more precisely, their historic absence — didn’t cause the recession any more than their renewal would quickly draw the country out of it. But their effect on the economy is almost always noticeable if not easily measured. Some economists argue that the continual construction of new megaprojects adds a quarter of a percentage point or more, on average, to the gross domestic product over the long term. Again, cause and effect aren’t clear, but the strongest periods of economic growth in America have generally coincided with big outlays for new public works and the transformations they bring once completed.
If their absence creates a void, particularly in a recession, what can fill it?
There is the quick-fix approach: stimulus. Giant public works projects take time to plan, cost lots of money and — the real sore spot for some — tend to add to taxes and deficits, regardless of how many people they might put to work for generations. Mindful of these political realities, President Obama has earmarked just $80 billion — a tenth of his stimulus package — for megaprojects, and put off most of that down payment until next year. His focus instead has been on spending hundreds of billions to quickly and visibly repair existing public works, especially highways, and also levees, dams and locks, particularly in the New Orleans area. That’s not a bad thing — those repairs are certainly needed — but it doesn’t create permanent wealth.
Another approach is to finance new projects several notches smaller in cost and boldness — and in contribution to economic growth. Denver and Salt Lake City, for example, are extending light rail and bus lines into the outlying suburbs, at a cost of less than $5 billion apiece. In New York, construction of the Second Avenue subway proceeds unhurriedly. All three projects, once finished, will bring new commercial activity to the communities they serve. Over time, the additional tax revenues from these activities will pay down the debt incurred in the construction. That has been the financial justification for many public works projects since World War II.
By the standards of the past, however, they are not the spectacular feats of engineering and ingenuity that greatly enhance the economy. The Erie Canal was just such a feat, linking the western frontier with East Coast markets. So was the transcontinental railroad, connecting the West Coast with Omaha and the existing Eastern railroads, spawning towns and commerce along the new Western route. Several generations later, the interstate highways were built by the states, mainly with federal money and federal planning, giving the auto and trucking industries a huge lift.
“The public works projects that have the largest effect on economic growth are those that integrate markets in different areas of the country,” said Francisco Rodriguez, director of research at the Human Development Report Office of the United Nations and author of a recent study on the role of infrastructure investment on economic growth.
If there is anything in the Obama administration’s approach that can be compared to the megaprojects, it would be the giant computer system, now being planned, to make health records available in hospitals and doctors’ offices across the country. Some economists argue that computerized records would raise economic output just as the Hoover Dam did 73 years ago. Still, only $19 billion has been set aside; the project is expected to cost nearly $100 billion, and who knows if the funding will materialize.
“Last year at this time we were debating whether we should be concentrating our spending on big projects that, in the long run, add to economic growth,” said John J. Wallis, an economic historian at the University of Maryland. “That debate never got resolved, and the stimulus bill we enacted in February ended up focused instead on quick spending.”
Absent a groundswell of public demand, those advocating large-scale projects are not widely heard. Gov. Edward G. Rendell of Pennsylvania, a Democrat, is perhaps the most outspoken.
“Just think about a high-speed rail system for the country,” the governor said, envisioning in particular a system that would link Philadelphia and Pittsburgh. “Think what it would mean for steel factories, concrete factories, asphalt factories, electrical equipment factories. It would mean a massive amount of orders and a lot of economic growth.”
Mr. Obama has allocated just $8 billion as a down payment for high-speed rail — in Mr. Rendell’s view not a drop in a $3 trillion bucket, a bucket that seems unlikely fill anytime soon. “I think we should get private capital involved,” he said, noting that the private sector has often in the past participated in the financing of big projects that in the long run benefit business.
Economists in the Obama administration acknowledge that when it comes to giant public works, the president has not yet gone far, but they suggest that he could be seen as having accomplished as much as Franklin Roosevelt did in 1933. Roosevelt, however, took office that year in the depths of the Depression. As a response to the crisis, public spending on megaprojects multiplied, and the effect remains: many of today’s post office buildings, for example, were built in that era, speeding up mail delivery; and thousands of miles of dirt roads were paved.
Mr. Obama’s Great Recession, by contrast, has been a milder affair, and a recovery appears to have started, even without the softening effects of megaprojects. If the recovery materializes, government investment in such large-scale efforts is likely to run up against an opposition that has prevailed since the late 1970s, when government came to be seen as inefficient — a second-string alternative to the private sector. Adding to the skepticism, many economists and policy makers reversed a view they once held — that rising output would generate enough additional tax revenue to pay down the national debt, including debt connected to megaprojects.
Now at least some in the administration have come to believe that megaprojects have value. Jared Bernstein, chief economist for Vice President Joseph R. Biden Jr., said, “We are on the eve of making truly significant and lasting down payments that are going to plant some lasting seeds.”
Don Pinkerton started his new job as a teacher at Revere High School about a year after he was laid off from a financial services firm.
The 51-year-old Swampscott resident used his time and some well-known local resources to reinvent himself. And today he said he feels fortunate to have weathered a difficult situation.
“I know a lot of people are really struggling, and I have friends who are looking for work, so I know how hard it can be,” he said.
Pinkerton said it was solid support from his family and some money that he had saved up for emergencies that gave him the time to execute a career transition.
There was also a valuable stop at the New England Aquarium.
“It was a great experience,” he said of the days he spent assisting visitors at the bustling Boston institution. “I realized I really like being in a science-oriented environment, and I really enjoyed helping to educate people.”
Pinkerton wasn’t paid for his time, but it was rewarding nonetheless. At the aquarium he realized he could thrive as a science teacher.
Aquarium officials say the past year has brought them a 15 percent to 20 percent increase in new volunteers. In 2009, about 100 more volunteers worked 11,000 more hours than in 2008.
“We have experienced a lot more interest due to the economy,” said Mona Chang, the aquarium’s manager for volunteer programs. “People have more time because many of them have lost their jobs.”
Pinkerton majored in a science in college, then spent 25 years in finance. The December 2008 separation agreement he signed with his former employer prohibits him from speaking about the firm.
“I was happy most days and I was paid well,” he said. “The work was challenging, but it was never really me.”
The layoff was a wake-up call of sorts.
In addition to volunteering at the aquarium, Pinkerton helped out at the Museum of Science, took graduate-level science courses at Salem State College, worked as a substitute teacher and received a state teaching certification.
This past December he landed his dream job, teaching biology at Revere High School.
Boston Realtor Michael Carucci thought he was going to be showing $1 million Back Bay properties to a new client during a meeting that had been arranged by phone but was a little scared when three men he described as thugs showed up at his office.
His fear turned to anger when the men said they had been sent by one of Carucci’s longtime friends, realtor David Gefke, to collect a $60,000 business debt. They allegedly even threatened him and his family.
“There was a part of me that just wanted to let this go,’’ Carucci said yesterday. “But at the end of the day, it isn’t right. And when they mentioned my wife and family . . . I think a message has to be sent that this is unacceptable.’’
Carucci, 51, chief executive of The Boston Real Estate Group, alerted the FBI and Boston police about the Jan. 29 confrontation, then cooperated in an investigation that led to the arrest of Gefke and another man Friday, followed by the arrest of two more men yesterday. All four are charged with extortion.
It is an ironic twist for Carucci, now seeking justice from the same government that once targeted him.
Mobster Stephen Flemmi
He was indicted in 1997 on federal charges that he laundered money for notorious Boston gangster Stephen “The Rifleman’’ Flemmi by helping him buy real estate in Boston’s Back Bay.
After a lengthy court battle, Carucci was acquitted of 94 counts. A jury convicted him of a handful of charges, but a federal appeals court overturned his conviction in 2004.
“I do believe in the system,’’ said Carucci, adding that his past legal battles did not give him pause in seeking the government’s help. “It was a very easy decision,’’ he said.
Carucci, who lives in a luxury downtown apartment and owns a Bentley, is not identified by name in the federal case and is referred to in an FBI affidavit as John Doe.
However, Michael Carucci acknowledged yesterday that he is the alleged victim.
The FBI affidavit unsealed in federal court this week alleges that Gefke, 48, who is president and founder of First Capital Mortgage Group in Boston and East Springfield LLC, dispatched several enforcers to threaten Carucci in a bid to force him to pay what he asserted was still owed on a $90,000 debt.
The FBI alleges that Carucci was also threatened at the Bristol Lounge at the Four Seasons Hotel in Boston and stripped of his $5,000 Mont Blanc watch. Later, he was allegedly forced to turn over several additional expensive watches.
Michael B. Lee, 29, an Irish national living in Dorchester, was arrested with Gefke Friday. Gefke and Lee are being held without bail pending a hearing Friday on whether they should remain jailed until the case is resolved.
Two more, Patrick Dehertogh and Brandon Milby, were arrested late yesterday on extortion charges and are expected to appear before a federal magistrate judge today, according to a spokeswoman for the US attorney’s office. She had no additional information on the two.
The affidavit says that Gefke filed a lawsuit last month asserting that Michael Carucci owed him money from the 2007-2008 renovation of a condominium on Commonwealth Avenue in the Back Bay.
Carucci’s attorney negotiated an out-of-court settlement, but when the deal fell apart, Gefke allegedly enlisted Lee and two other men to collect the money, the affidavit says.
The suit, filed by Gefke in Boston Municipal Court, alleges that Michael Carucci signed a promissory note in 2008 agreeing to repay East Springfield Street LLC, $47,650, plus 14 percent interest by March 11, 2009 for a loan on the condominium. The suit says he has not made any payment.
In a reply to the suit, Carucci denied breaching the contract.
Yesterday Michael Carucci said he agreed to pay the money to Gefke, but only if he signed an agreement that the debt was settled. He said an unidentified investor from Boca Raton, Fla., had funded the loan.
“I didn’t want to pay him the money, then two or three months later have the guy in Florida say, ‘You owe me the money,’ ’’ said Carucci.
He described Gefke as a longtime friend and said he was stunned that Gefke would allegedly send “legbreakers’’ to try to collect money from him.
Carucci said he is in a difficult situation and added that it is harder “given what’s happened to me in the past and how it could be misread by the general public that doesn’t have the facts.’’
Carucci summed up his past case as “a difference of opinion’’ with the Justice Department over what his responsibilities were when a qualified buyer wanted to buy real estate.
After Carucci’s indictment in the money laundering case, Flemmi was charged with 10 murders and publicly exposed as a longtime FBI informant. He is serving a life sentence after pleading guilty to the slayings.
“Had I known then what I know now, I wouldn’t have walked away from [Stephen “The Rifleman’’ Flemmi]; I would have run away from him,’’ Carucci said.
In the six years since he was exonerated in the money laundering case, Michael Carucci has become one of Boston’s most successful realtors.
Previous Press:
The debut of government witness William St. Croix, the son of notorious Boston mobster Stephen “the Rifleman” Flemmi, began this week as the trial of Back Bay real-estate broker Michael L. Carucci gets underway. St. Croix is one of fifty scheduled witnesses that the government will call against Carucci, who is described as a “partner” of Flemmi who helped launder money by purchasing millions of dollars of real estate for the co-leader of the infamous Winter Hill Gang. Carucci was charged with 103 counts of money laundering, conspiracy and racketeering. Carucci’s lawyer, Martin Weinberg, claims St. Croix is a “career con man, a predator who lived a life of deception.” He told the jury the government allowed St. Croix to escape jail so he could testify against “a family man who runs a real estate agency.” St. Croix is expected to reveal a sordid “Life With Father” tale that includes Flemmi having a sexual affair with St. Croix’s half-sister, Deborah Hussey, before murdering her.
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UNITED STATES v. CARUCCI
After a lengthy court battle, Michael Carucci was acquitted of 94 counts.
A jury convicted him of a handful of charges, but a federal appeals court overturned his conviction in 2004.
UNITED STATES, Appellant, v. Michael L. CARUCCI, Defendant, Appellee,
United States, Appellee, v. Michael L. Carucci, Defendant, Appellant,
United States, Appellant, v. Michael L. Carucci, Defendant, Appellee.
Nos.?02-2198, 03-1158 and 03-1244.
— April 13, 2004
Before LIPEZ, Circuit Judge, CAMPBELL, Senior Circuit Judge, and STAHL, Senior Circuit Judge.
Martin G. Weinberg, with who m Oteri, Weinberg & Lawson, were on brief, for Michael L. Carucci.Demetra Lambros, Attorney, with whom Michael J. Sullivan, United States Attorney, Richard L. Hoffman, Assistant United States Attorney, and James D. Herbert, Assistant United States Attorney, were on brief, for the United States.
Defendant-appellant Michael Carucci was a real estate broker and a business associate of Stephen Flemmi, the notorious leader of Boston’s “Winter Hill Gang.” Carucci and Flemmi were indicted on charges relating to money-laundering, but only Carucci’s case was tried. ? Both during and after the jury trial, the district court, pursuant to Fed.R.Crim.P. 29, entered judgments of acquittal on dozens of the charged counts. ? Ultimately, Carucci was found guilty of two counts of engaging in monetary transactions in criminally-derived property in violation of 18 U.S.C. §?1957.
On appeal, Carucci contends that the evidence was insufficient to establish criminal liability under the statute, and challenges the trial court’s “willful blindness” instruction to the jury. ? The government cross-appeals, contending that the district court erred in entering the post-verdict judgments of acquittal; ?in ordering a conditional new trial should the Rule 29 rulings be reversed; ?and in sentencing. ? For the reasons set forth below, we reverse Carucci’s conviction on the two counts and affirm the district court’s judgments of acquittal on the remainder.
I.?BACKGROUND
A.?Factual history
We set forth the facts underlying Carucci’s convictions in the light most favorable to the verdict. ? See United States v. Diaz, 300 F.3d 66, 69 (1st Cir.2002).
1.?238 Marlborough Street
Carucci’s company, Group Boston Real Estate, managed a building at 238 Marlborough Street in Boston. ? One of the owners of the property expressed interest in selling, and Carucci offered to help find a buyer. ? In 1991, Carucci submitted a bid from Flemmi. ? During the negotiations, the seller asked Carucci where Flemmi’s money was coming from, and Carucci told them it was from lottery winnings. ? Flemmi, however, told others that the money was from a family trust. A few months after the sale, Carucci told the seller that the money had come from Flemmi’s family.
In the course of the property sale, Carucci referred Flemmi to Anthony Summers, a real estate lawyer. ? At trial, Summers testified that in September, 1992, Carucci asked Summers whether he thought it would be a problem to sell real estate to Flemmi. ? Summers responded, “as long as he did everything legally, that I didn’t think he’d have a problem.”
On October 2, 1992, the Marlborough Street deal closed for $945,000. ? Carucci, Summers, and Flemmi, among others, attended the closing. ? The purchaser was a nominee trust set up by Summers, the “238 Marlborough Street Trust.” ? The trustees were Carucci and one of Flemmi’s sons, Stephen Hussey; ?Flemmi was the beneficial owner. ? Flemmi paid in cash with seven checks. ? The checks were drawn from different accounts, none of which bore Flemmi’s name, and different banks. ? Three were payable to the Mary Irene Trust?1 (of which Flemmi was a trustee), three were payable to Mary Flemmi (Flemmi’s mother) and one was payable to Jeanette Flemmi (Flemmi’s ex-wife). ? In conjunction with the sale, Summers drafted a mortgage evidencing a $975,000 loan from the Mary Irene Trust to the 238 Marlborough Street Trust. ? The mortgage, on which Flemmi’s name appeared, was publicly recorded.
Also on October 2, 1992, Flemmi and Carucci entered a joint venture agreement concerning the development and sale of the condominium units at 238 Marlborough Street. ? Carucci invested $15,000 of his sales commission into the joint venture, and Flemmi handled the remaining costs.
2. ?362 Commonwealth Avenue
In mid-1992, another real estate broker told Carucci that 362 Commonwealth Avenue in Boston, a commercial condominium containing a laundromat, was available as an investment property. ? Carucci submitted an offer on the property signed by Hussey as trustee of SMS Realty Trust and provided a binder check for $1,000 signed by him and drawn on the account of Group Boston. ? He also participated in the sale negotiations.
According to the purchase and sale agreement, the purchaser of the property was Jeannette Benedetti, trustee of Comm-1 Realty Trust. The agreement was signed by Benedetti and Karen Snow, Flemmi’s daughters. ? On October 26, 1992, Carucci signed over to the listing broker a check for $5,125 from the Mount Washington Bank payable to Group Boston to serve as a deposit.
At the property closing on December 9, 1992, three checks were tendered as payment: ?a Mount Washington Bank check in the amount of $30,500 and a Hyde Park Savings Bank check in the amount of $70,000, both payable to Benedetti, and a $16,408.37 Winter Hill Federal Savings Bank check payable to Summers & Summers.
Prior to the closing, in November, 1992, Commonwealth Laundries, Inc. was formed, with Carucci and Flemmi as the major stockholders. ? Jian-Fen Hu, Flemmi’s girlfriend, was president, treasurer, clerk, and director. ? On December 11, 1992, Commonwealth Laundries entered into a lease of 362 Commonwealth Avenue with Comm-1 Realty Trust. ? Hu and Benedetti (as trustee) signed the lease. ? Commonwealth Laundries borrowed $120,000 from the Mary Irene Trust to purchase equipment and $110,000 from Flemmi for improvements.
At trial, Flemmi’s other son, William St. Croix, testified pursuant to an immunity agreement about his many years of criminal activity. ? He also testified that he first met Carucci at his father’s home in Milton, Massachusetts, in 1990 or 1991. ? At that time, Carucci told him he was going to broker the sale of the house. ? When St. Croix asked Carucci if he knew who his father was, Carucci responded, “Yes, everybody knows who your father is. ? Your father was the big guy.” ? St. Croix testified that he visited Group Boston’s offices “probably hundreds of times.”
B.?Procedural history
On March 11, 1997, a grand jury of the United States District Court for the District of Massachusetts returned a 103-count indictment against Flemmi and Carucci. ? It charged both defendants with conspiracy to commit money-laundering in violation of 18 U.S.C. §?1956(h); ?substantive money-laundering offenses in violation of 18 U.S.C. §?1956; ?transactions in criminally derived property in violation of 18 U.S.C. §?1957; ?and RICO conspiracy in violation of 18 U.S.C. §?1962(d). ?In May 2001, as part of a consolidated plea in another case, Flemmi pleaded guilty to an information that encompassed the money-laundering conspiracy charges and the charges against him in this case were dismissed.
In March and April, 2002, Carucci alone was tried before a jury. ? At the close of the government’s case, pursuant to Fed.R.Crim.P. 29(a), the district court granted Carucci’s motions for judgment of acquittal on counts 1, 14-66, and 76-103. ? It then submitted counts 2-13 and 70-75 to the jury. ? These counts charged violations of §§?1956 and 1957 and concerned the laundromat venture. ? Specifically, counts 9-13 and 73-75 related to the purchase of the condominium, and counts 2-8 and 70-72 related to the purchase of the laundry equipment.
On April 16, 2002, the jury returned a verdict finding Carucci not guilty on the §?1956 counts (2-13) and guilty on the §?1957 counts (70-75). ? At a post-verdict hearing, the district court granted judgment of acquittal on counts 70-72 and 74, and provisionally granted a new trial on those counts. ? This left standing only the verdicts on counts 73 and 75, which concern, respectively, the December 9, 1992, transfer of a Mount Washington Bank check in the amount of $30,500 and a Hyde Park Savings Bank check in the amount of $70,000.
On December 20, 2002, the district court sentenced Carucci to ten months in the custody of the Bureau of Prisons, with a recommendation that Carucci serve his sentence in a community confinement center (CCC), followed by twenty-four months of supervised release. ? The same day, the Department of Justice announced that the Bureau of Prisons would no longer permit CCC placement for more than ten percent of the sentence imposed. ? On December 31, 2002, the district court revised the sentence to encompass five months’ incarceration and five months’ home confinement.
II.?DISCUSSION
A.?Carucci’s challenge to his conviction under 18 U.S.C. §?1957
Carucci contends that there was insufficient evidence to convict him on counts 73 and 75, which charge him with engaging in monetary transactions in criminally-derived property in violation of 18 U.S.C. §?1957. ? We review Rule 29 determinations de novo. ?United States v. Boulerice, 325 F.3d 75, 79 (1st Cir.2003) (citing United States v. Carroll, 105 F.3d 740, 742 (1st Cir.1997)). ? We will affirm the conviction if, “after assaying all the evidence in the light most amiable to the government, and taking all reasonable inferences in its favor, a rational factfinder could find, beyond a reasonable doubt, that the prosecution successfully proved the essential elements of the crime.” ?Id. (quoting United States v. O’Brien, 14 F.3d 703, 706 (1st Cir.1994)).
To establish a violation of 18 U.S.C. §?1957, the government must prove that (1) the defendant engaged or attempted to engage in a monetary transaction with a value of more than $10,000; ?(2) the defendant knew that the property involved in the transaction had been derived from some form of criminal activity; ?and (3) the property involved in the transaction was actually derived from specified unlawful activity. ?18 U.S.C. §?1957(a).2 Subsection (c) of the statute provides: ?“the Government is not required to prove the defendant knew that the offense from which the criminally derived property was derived was specified unlawful activity.” ?Id. §?1957(c). ?In other words, a defendant may not be convicted under §?1957(a) unless he knew that the transaction involved “criminally derived property,” but he need not know that the property was derived from the “specified unlawful activity.” ?United States v. Richard, 234 F.3d 763, 768 (1st Cir.2000) (quoting United States v. Gabriele, 63 F.3d 61, 65 (1st Cir.1995)) (internal quotation marks omitted).
Carucci maintains that the evidence as to each of these elements is insufficient to support conviction on counts 73 and 75. ? We need not address the first two requirements of §?1957, because we hold that the government did not adduce sufficient evidence that the purchase of 362 Commonwealth was derived from proceeds from specified unlawful activity. ? We explain below.
1.?Scope of the specified unlawful activity
A threshold issue on appeal is the scope of the specified unlawful activity (“SUA”) charged to the jury. ? The indictment set forth four SUAs as underlying the §§?1956 and 1957 charges: ?drug trafficking, extortion, loan sharking, and gambling. ? During the charge conference, the district court ruled that there was insufficient evidence to submit loan sharking and drug dealing to the jury.
In the jury charge, however, the court’s instructions were inconsistent. ? During two occasions in the charge, the court instructed that all four crimes constituted specified unlawful activity. ? First, it stated:
You are instructed that the offenses of conducting an illegal gambling business, engaging in extortionate credit transactions, interference with commerce by extortion, and distribution and conspiracy to distribute narcotics ? constitute specified unlawful activity ?
Later, after reciting the four offenses again, the court instructed:
Each of the crimes just listed qualifies as specified criminal activity. ? Thus, if you find beyond a reasonable doubt that any of the funds involved in the transactions listed in the indictment derived from the commission of any of these crimes by any person, then the transactions involved proceeds derived from specified criminal activity.3
The court then stated that it would provide further details as to the elements of the SUA offenses later.
In the context of instructing on §§?1956 and 1957, however, the court described only the elements of extortion and gambling. ? As to those two offenses, it stated that it was instructing the jury “as to the elements of the offenses listed as specified unlawful activity in the indictment ?” It set forth the elements of extortion and gambling that the government had to prove beyond a reasonable doubt in order for the jury to find a crime “from which Flemmi derived illegal proceeds.” ? The court did not state the elements of loan sharking or drug trafficking, and did not mention those offenses again.
Carucci maintains that the district court’s failure to set forth the elements of drug trafficking prevented the jury from basing a §?1957 conviction on that SUA.4 We need not decide this issue because, even assuming that the jury was instructed correctly, there is insufficient record evidence that the funds used in the real estate transactions were actually derived from the specified unlawful activities, as opposed to other criminally derived proceeds. See section II(A)(2), infra.
2.?Evidence of specified unlawful activity
As discussed supra, the statute requires proof that the property involved in the transaction was actually derived from specified unlawful activity. ?18 U.S.C. §?1957(a). ? Application of this requirement is not always straightforward. ? This circuit and others have held that §?1957 convictions necessitate proof beyond a reasonable doubt of the predicate crime. ? See, e.g., United States v. Burgos, 254 F.3d 8, 14 (1st Cir.2001) (stating that in order to convict the defendant of money-laundering, “the government had to prove that he had attempted to distribute cocaine to satisfy the specified unlawful activity element of the crime” (internal quotation marks omitted)); ?United States v. Lovett, 964 F.2d 1029, 1041-42 (10th Cir.1992) (“the elements of the particular ‘specified unlawful activity’ ? are essential elements that the prosecution must prove in order to establish a violation of §?1957”); ?see also United States v. Blackman, 904 F.2d 1250, 1257 (8th Cir.1990). ? However, proof of a specific, individual underlying offense-i.e., a particular unlawful mailing in a mail fraud SUA, or a particular drug sale in a drug trafficking SUA-is not necessary to support a §?1957 conviction. ? See United States v. Richard, 234 F.3d 763, 768 (1st Cir.2000); ?United States v. Mankarious, 151 F.3d 694, 701-02 (7th Cir.1998). ? Rather, circumstantial evidence may suffice to allow a jury to infer a predicate act from an overall criminal scheme. ? See, e.g., Mankarious, 151 F.3d at 702-03; ?United States v. Jackson, 983 F.2d 757, 766-67 (7th Cir.1993); ?Blackman, 904 F.2d at 1257.
Even applying this broad construction of §?1957 liability, the evidence of specified unlawful activity adduced at Carucci’s trial was insufficient to support his conviction.5 We first consider the evidence of gambling and extortion, the two SUAs that were unequivocally charged to the jury. ? During the extensive trial testimony, the only specific mention of either gambling or extortion was by Flemmi’s son, St. Croix. ? Initially, he testified as to his personal criminal history:
Q:? What other types of criminal activities have you been involved in?
A: ?I have been involved in drug rip-offs, selling drugs, extortion, gambling, arson, operating an illegal club.
St. Croix then stated that Flemmi was involved in “some” of those activities, but did not specify which ones. ? No other witnesses testified about Flemmi’s participation in gambling or extortion, or about proceeds therefrom. ? Thus, at very best, St. Croix’s testimony fell short of stating that Flemmi engaged in gambling or extortion, and there was simply no other evidence on this critical point.
St. Croix’s testimony suffers from an additional weakness: ?it did not indicate a time frame in which the gambling and extortion, if any, occurred. ? In order to establish §?1957 liability, Flemmi must have derived proceeds from gambling or extortion before November 22, 1992, the last date money was deposited into the accounts on which the transactions at issue were drawn. ? See Mankarious, 151 F.3d at 704 (“A money launderer must obtain proceeds before laundering can take place.”); ?United States v. Christo, 129 F.3d 578, 580 (11th Cir.1997) (same).
After careful consideration of the record, we conclude that there was insufficient evidence for a rational jury to find that Flemmi derived proceeds from gambling or extortion before November 22, 1992. The gambling SUA, as the district court instructed, required proof beyond a reasonable doubt that Flemmi conducted a gambling business that (1) violated Massachusetts law; ?(2) was knowingly and intentionally conducted, financed, managed, supervised, directed or owned by five or more persons; ?and (3) which was either in substantially continuous operation for thirty or more days or had a gross revenue of $2000 or more on any single day. ? See 18 U.S.C. §?1955. ? Even if the jury could have reasonably inferred a violation of Massachusetts law, there was no evidence presented to the jury as to the second or third elements required for the specified federal gambling crime. ? Moreover, the term “gambling” is possessed of common meanings apart from the legal definition. ? See Webster’s Third New International Dictionary 932 (1986). ? Even if the jury believed that Flemmi was involved with “gambling,” we cannot presume that it found that all of the elements of §?1955 were satisfied.
As to extortion, the SUA required the government to prove that (1) Flemmi knowingly and willfully obtained property from the victim by means of extortion; ?(2) Flemmi knew that the victim parted with property because of extortion; ?and (3) the extortion affected interstate commerce.6 18 U.S.C. §?1951. ? Again, no evidence was presented to the jury as to these elements. ? As with gambling, St. Croix’s equivocal identification of Flemmi with only “some” of his own criminal activities fell short of indicating that “extortion” was one of them. ? Furthermore, even if the jury could reasonably surmise from St. Croix’s use of the terms “gambling” and “extortion” that Flemmi’s conduct satisfied the statutory elements of those offenses, there is no evidence linking it to the relevant accounts during the relevant time period in the relevant amount.
As to the SUA of drug trafficking, the government points to two pieces of evidence purporting to link Flemmi to drug trafficking proceeds. ? First, St. Croix testified that a drug dealer named Johnny Debs agreed to purchase $100,000 of cocaine from him in the late 1980s. ? He stated that Debs knew nothing about St. Croix, but approached him because of Flemmi’s reputation as a narcotics dealer. ? Second, St. Croix testified that he took drugs from dealers whom he promised to pay after selling the drugs. ? He did not intend to repay the dealers, however, and said he instead “would divvy it up with people that I was involved in and later my father.” ?(It is not entirely clear from the testimony whether this scheme was merely a plan, or whether the “divvying” in fact took place.) ? St. Croix also testified that he was involved in drug trafficking from 1989 to 1997.
Assuming without deciding that this evidence shows that Flemmi engaged in drug trafficking, it falls short of establishing that the funds used in the real estate transactions were actually derived from drug funds as opposed to other criminally-derived proceeds. ? As with gambling and extortion, there is no evidence as to the amount of proceeds or the specific time frame in which the proceeds were conveyed to Flemmi. ? Indeed, the fact that St. Croix specified that any sharing with Flemmi happened “later” suggests that Flemmi was unlikely to have derived drug-trafficking proceeds before the 1992 transaction. ? Accordingly, to infer from this testimony that at least $10,000 of the funds involved in the real estate transaction in 1992 were derived from Flemmi’s drug trafficking is too great a stretch.
The government points to evidence of Flemmi’s leadership of an organized crime gang and apparent lack of legitimate income to support the SUAs. It argues that the testimony that Flemmi was a leader of the Winter Hill Gang “told the jury much about Flemmi and his money.”?7 The government also points to the fact that Flemmi’s parents had meager incomes and lived frugally, and hence could not have provided any money to Flemmi for the purchase.
While these factors certainly suggest criminally derived income in a general sense, the evidence fails to supply a link to gambling, extortion or drug trafficking specifically. ? Accepting that Flemmi’s income was illegitimate, it could have been linked to any number of criminal activities; ?to conclude from this evidence that Flemmi derived proceeds from the specified SUAs is simply too speculative.
Moreover, a §?1957 conviction cannot be based solely on the finding that a known criminal had no other legitimate income. ?Blackman, 904 F.2d at 1257. ? In the cases cited by the government, courts generally affirm money-laundering convictions only where such evidence is accompanied by additional, more specific indicia of criminal activity. ? See, e.g., United States v. Hetherington, 256 F.3d 788, 794 (8th Cir.2001) (evidence of defendant’s awareness that his company’s “entire operation was based on deceit”); ?United States v. Eastman, 149 F.3d 802, 804 (8th Cir.1998) (evidence of defendant’s illegal drug purchases, and evidence that the money defendant provided for transaction had a drug scent); ?United States v. Meshack, 225 F.3d 556, 572 n. 12 (5th Cir.2000) (evidence of drug transactions at defendant’s restaurant); ?United States v. King, 169 F.3d 1035, 1039 (6th Cir.1999) (evidence that defendant “coordinated a multi-person drug distribution business”).
The government also contends that Flemmi’s use of cash and money orders-as well as his use of multiple banks, multiple checks, and nominee trusts-supports the inference that the transactions were derived from SUAs. Again, this evidence does not establish a sufficient nexus to the specified SUAs. While it is true that a suspiciously structured financial transaction can constitute circumstantial evidence of money-laundering, the cases cited by the government consistently feature additional evidence of unlawful activity. ? See, e.g., United States v. Smith, 223 F.3d 554, 577 (7th Cir.2000) (“Witnesses testified that Wilson personally bought and sold drugs, so the jury knew that he had illegal cash sloshing around that could have been used.”); ?United States v. Reiss, 186 F.3d 149, 152-53 (2d Cir.1999) (in convoluted sale of airplane, an associate who was “heavily involved in narcotics trafficking and money laundering in the United States” facilitated the transaction). Here, there is no comparable evidence that Flemmi had engaged in the specified SUAs in the relevant time period.
In sum, the evidence in the §?1957 case against Carucci is simply too thin. ? While Flemmi’s apparent lack of legitimate income and the structuring of his financial dealings certainly suggest criminal activity, the government failed to prove a nexus to the alleged specified unlawful activity, much less to the accounts involved in the transactions at issue. ? Carucci’s convictions on counts 73 and 75 cannot stand.8
B.?The government’s cross-appeal
We now turn to the government’s cross-appeal. ? The government contends that the district court erred in allowing Carucci’s motion for acquittal on counts 70 through 72 and 74, which set forth additional violations of §?1957. ?(Counts 70 through 72 related to the purchase of the laundry equipment; ?count 74 related to the purchase of the condominium.) ? As grounds for its decision, the district court stated that there was insufficient evidence to establish that Carucci knew that the property involved in the transactions had been derived from criminal activity.
As noted supra, we review Rule 29 determinations de novo. ? Counts 70-72 and 74 are fatally undermined by the government’s failure of proof as to §?1957′ s requirement that the transactions at issue were derived from specified unlawful activity. ? As discussed supra, no reasonable jury could conclude that the purchases of the equipment or condominium involved proceeds from Flemmi’s gambling, extortion, or drug trafficking. ? Accordingly, we affirm the district court’s grant of Carucci’s Rule 29 motion, albeit on different grounds.9
III.?CONCLUSION
For the reasons set forth above, we reverse Carucci’s convictions on counts 73 and 75 of the indictment and affirm the district court’s judgments of acquittal on counts 70-72 and 74.
FOOTNOTES
1. ?The money contributed by the trust constitutes more than half of the total payment and can be linked to a series of substantial cash deposits over a one-month period in 1982 at Winter Hill Savings Bank.
2. ?18 U.S.C. §?1957(a) states, in relevant part:“Whoever ? knowingly engages or attempts to engage in a monetary transaction in criminally derived property of a value greater than $10,000 and is derived from specified unlawful activity, shall be punished ?”
3. ?This instruction was given during the portion of the charge dealing with the §?1956 claim. ? It was expressly incorporated into the portion concerning §?1957.
4. ?At oral argument before this court, the government expressly abandoned its argument that loan sharking constituted a SUA for purposes of the §?1957 charge. ? Accordingly, we do not consider it further.
5. ?The government attempted but failed to present additional evidence concerning the SUAs. At trial, the district court excluded extensive testimony by government witnesses concerning Flemmi’s participation in extortion, drug dealing and gambling schemes, as well as his lack of legitimate income. ? The court determined that the proffered evidence was insufficiently linked to the transactions specified in the indictment and to Carucci’s criminal liability. ? Additionally, the court held that some of the evidence suffered from hearsay and relevance problems. ? The government’s position on appeal is that the evidence that the district court allowed in was sufficient, standing alone, to support Carucci’s §?1957 convictions.
6. ?It appears to be undisputed that it is Flemmi’s criminal conduct that is at issue for purposes of §?1957, not St. Croix’s.
7. ?The government also goes into some depth as to St. Croix’s involvement with drug dealing and extortion and expressly urges us to apply the saying “like father, like son.” ? None of the evidence concerning St. Croix’s conduct supports a conclusion that Flemmi himself engaged in the SUAs.
8. ?Accordingly, we need not deal with the other issues Carucci raises on appeal, including the adequacy of the jury instructions.
9. ?As a result of this holding, we need not address the district court’s award of a conditional new trial should the Rule 29 rulings be reversed. ? Nor do we address the sentencing issue raised by the government.
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Small and mid-size business owners
Individuals with specialization in specific business areas in demand by those business owners.
The Alliance has grown without any advertising, and very little marketing — mostly by word of mouth. The attendance at the montly breakfast meetings has been consistently increasing, month to month. The number of members continues to grow, along with the interest from almost everyone who hears about the Boston Business Alliance — beyond Boston, and beyond Massachusetts. People in other cities and even other countries have expressed an interest in bringing a similar concept to their cities. The first objective of the Boston Business Alliance is to prove itself as a valuable source of information for business owners and members before taking the concept into other cities.
After all, the initial concept was how to help others!
Contact:
Boston Business Alliance Baldwin Park I
12 Alfred Street, Suite 300
Woburn, MA 01801
617-621-1555
Boston Business Alliance Operating Executives
Ray Arpin
Executive Director Phone: 617-435-1159
Ray.Arpin@BostonBusinessAlliance.com
Buyer’s remorse hit Scott Schulthess minutes after he flipped open his laptop at a Cambridge coffee shop to review his spending habits last year on PearBudget.com.
“This makes me feel bad,’’ said the 26-year-old computer programmer, focusing in on his June purchase of an iPhone, displayed in his online account on the budget-tracking website. On impulse, he bought the new phone rather than repairing his old one. “Basically, a waste of $400.’’
In tough economic times, more and more people are flocking to budget-tracking websites – Pear Budget, Mint.com, money.Strands.com, Wesabe.com, and JustThrive.com – that give users a sense of where they’re actually spending their money each month. Some budget-tracking sites are even rolling out new features such as iPhone applications, Twitter alerts, and Spanish-language options as they compete more fiercely for customers. Personal finance websites, ranging from budget trackers to financial blogs, are becoming increasingly popular and now attract one in four people who use the Internet, according to Comscore.com, which tracks Web traffic.
“There’s been a profusion of these things, in part because of what’s going on in the broader economy,’’ said Paul Kedrosky, who writes an economics blog in San Diego called Infectious Greed. “People feel they have to be more frugal, so budgeting’s in vogue.’’
These budget-tracking websites are becoming so popular that banks are now purchasing the software for their online customers so they can preserve crucial banking relationships. Budgeting software “is the future of online banking,’’ said Peter Glyman, a founder of Geezio, which sells the software to banks and credit unions.
The theory behind budget-tracking websites is that people often know their money disappears fast but they don’t know precisely where it goes. Seeing, in detail, where spending occurs is the first step to curbing it. To help users budget, these sites sort each expense into a fixed or customized category – rent, utilities, clothing, Starbucks, gym membership – and then compare actual spending to that category’s budget amount, specified by the user in advance. The sites’ colorful charts display whether users are under- or over-budget every month in each category.
A common realization by users of budgeting websites is how much they spend every month eating out, said Aaron Patzer, Mint’s founder and chief executive. Indeed, in a recent survey of Mint users, 90 percent said they changed their spending habits after using the budgeting software, and 40 percent said they cut back on dining out.
“Having the feedback and the awareness that you went to Starbucks 30 times last month changes peoples’ habits,’’ Patzer said.
Schulthess, the Cambridge resident, said he and his girlfriend started taking cooking classes so they could cut their food budget after Pear Budget showed he was spending $500 a month on dining out. Despite lapses like the iPhone splurge, he said Pear Budget helps him stick to his goal of saving 10 percent of his income. Schulthess said he’s saved about $200 per month on food alone.
“If you get laid off or wanted to change your job, you need financial security to be comfortable,’’ he said.
Budgeting websites are free to users, but some earn revenues each time they successfully direct users to financial products, such as credit cards, offered by advertisers, which some say implicitly encourages the use of credit to someone who may instead need to curb their spending.
The sites also differ in how they collect data. Some sites are automated budget trackers, which require users to provide their bank, credit card, IRA, and other account numbers and their online passwords. The budgeting site then uses this information as permission to receive a download of their spending and income data from the financial institution.
Mint, which extracts the data automatically, has emerged as the giant among the sites. With more than 1 million unique visitors per month, according to Compete.com, a website that tracks Internet traffic, Mint became so successful that it was purchased by financial software maker Intuit in September for $170 million. Intuit plans to replace the online version of its famous Quicken software with Mint’s more modern technology, the companies said. Wesabe, which also extracts data automatically, is the second-most-popular site for individuals, with more than 35,000 unique visitors per month.
But many potential customers, particularly older users, are uncomfortable with turning over their account information to a third party. To reach a broader audience, some budget sites are adapting. Money Strands, which was rolled out less than a year ago, offers manual and automatic data entry. Mint.com said that it also plans to offer manual data entry in coming months.
“Many people from all ages say, ‘I would never share that information,’ ’’ said Diane Ty, an AARP senior vice president and expert on personal finance.
MINT.COM
Pros:Mint.com uses state-of-the-art software to extract a user’s financial information from bank accounts, credit cards, and other sources. Unlike some sites, it also tracks a wide range of financial activities, from IRAs to college funds. Other features include a weekly e-mail or text message listing user’s five largest expenditures. Slick, colorful graphics and an iPhone application are also appealing.
Cons: Requires users to turn over account passwords, though the company points out that it does not store users’ personal information – only data – or their passwords. Users report issues arise from downloading data from their bank or other accounts such as an inability to connect to certain financial institutions and glitches in categorizing some expenditures.
Final word:Mint.com is the granddaddy of budgeting websites. The site said that it is working to continually support more institutions.
MONEY.STRANDS.COM
Pros: Rolled out less than a year ago and in use at a major Spanish bank, the budget-tracking website has features older sites lack, including a Spanish-language capability, iPhone app, advanced data analysis, and support for 44 currencies. Key distinction from other sites: automated data extraction, like Mint, but also a manual capability for those leery of turning over bank account information to third parties.
Cons: The newest of the budget-tracking sites is still working out the kinks and responding to user comments and complaints. Does not integrate investment accounts.
Final word: The jury’s out. But Atakan Cetinsoy, vice president of personal finance products, said the company is serious about creating a website that strikes the crucial balance between simplicity and usefulness. An “obvious next step’’ is to integrate users’ investment accounts, he said.
PEARBUDGET.COM
Pros: Popular because it’s really easy to use and simplifies for people who may be overwhelmed by budgeting. Founder responds personally to users’ questions.
Cons: No automated data download – only manual expense and income entry is allowed by the software.
Final word: Created by Charlie and Sarah Park in 2004 and still run out of their Williamsburg, Va., home. Park said he remains true to his original mission of helping people, providing personal service, and creating a homey feel.
WESABE.COM
Pros: The best site for people who seek the emotional encouragement of an online support group to discuss financial issues or solicit solutions to problems such as debt overload. Offers suggestions for low-cost retailers in the user’s neighborhood. Has iPhone and other smartphone apps. User complaints and questions are visible to all – not just members who log in.
Cons: Advice from third parties can be unreliable. Users complain that responses to requests for Web support have slowed, and the company agrees it is running behind. Automated data extraction only.
Final word: The four-year-old company is one of the most popular sites – 37,500 unique visits per month – and suffers from some growing pains. Customer support has slowed but remains a priority: Founder and chief executive Marc Hedlund responds personally on the site to users with complaints and questions.
JUSTTHRIVE.COM
Pros: Cool feature allows users to designate a specific savings goal and track progress toward that goal. The site also provides education or guidance about how to reach goal.
Cons: Automated data extraction only. Budget tracker also can be accessed via MoneyRight.com in the wake of acquisition by Lending Tree.
Final word: For those who find it hard to take directions via e-mail or Twitter, JustThrive is a great bet. It provides good customer service over the phone, which is important for serious budget trackers who aren’t Web whizzes.
Mo Vaughn (right) and Eugene Schneur revitalized a drug-infested five-building complex in Brooklyn, and made it a decent place to live. Photo by Buck Ennis.
Six months after Mo Vaughn set up Omni New York in 2004, the fledgling real estate firm struck, snapping up a 286-unit affordable housing complex in the Bronx. By the end of its second year, Omni New York had tripled its holdings to a total of 869 units.
As far as most people were concerned, however, Mr. Vaughn was still a Mets first baseman, even though his baseball career ended in 2003.
“I wanted people to take us seriously and know that we were the real deal,” says Mr. Vaughn, who is seated at a Brooklyn eatery with his partner, Eugene Schneur, explaining his transition from baseball hero to real estate mogul—albeit one whose new uniform includes not just sharply tailored suits but large diamond-encrusted hoop earrings. “I wanted respect.”
These days he’s got it—not as the American League’s former MVP but as the managing director of one of the city’s best-regarded and most active buyers and managers of affordable housing. Along the way, Mr. Vaughn and company have earned a place as one of the city’s top choices for turning around distressed residential properties.
Today Omni ranks as a midsize firm capable of competing with the bigger players, swallowing up sprawling properties such as the decrepit 14-building, 416-unit complex in the South Bronx that Omni bought the mortgage on at a foreclosure auction—with the city’s blessing—in December. “Given their track record, they are ideally suited to deal with troubled projects,” says NYC Housing Preservation and Development Commissioner Rafael Cestero.
Since 2004, Omni has spent over $500 million buying and rehabilitating 21 affordable-housing buildings with a total of nearly 3,500 units in the Bronx, Brooklyn, Long Island and as far away as Wyoming. The majority of the buildings they own and manage are Section 8 buildings, whose low-income tenants rely on federal vouchers to help pay their rent. Omni finances its deals using tax-exempt bonds and the proceeds from the sale of low-income-housing tax credits.
Making money and doing good
That is exactly what it did when it acquired the Noble Drew Ali Plaza in the Brownsville section of Brooklyn—the 2007 deal that put Omni on the map. At the time, the five-building complex with 358 units was a haven for drug dealers and addicts, its hallways urine-soaked and graffiti-lined and its apartments crumbling.
Omni purchased the property out of bankruptcy for $23 million with financing from various city agencies, including HPD, as well as federal grants. The developer then poured $25 million into refurbishing everything from new elevators and energy-saving appliances to 326 security cameras. After two years of work, Messrs. Schneur and Vaughn capped off the revitalization by giving the complex a new handle: “The Plaza.”
“Noble Drew Ali, without a doubt, was one of the most complicated projects [we've seen],” says Mr. Cestero. “They restored it to a quality place for people to live by taking a very aggressive approach to renovating buildings.”
Today Mr. Vaughn, who played for the Boston Red Sox in the 1990s, spends most of his time on the operations side of the business, working with Omni’s construction, management and maintenance teams, while Mr. Schneur focuses on the dealmaking.
“I’m the eyes,” said Mr. Vaughn, who got his start in real estate by investing in Manhattan nightclubs with help from Mr. Schneur, then his attorney. “I make sure that everything that needs to get done gets done.”
In fact, Omni was his idea. In Ohio, where Mr. Vaughn spent his off-seasons, he met a developer successfully buying affordable housing using tax credits and decided to try the concept out in New York.
“They are smart people,” says Lisa Gomez, executive vice president of affordable housing developer L+M Development Partners. “They get how to do affordable housing and look to the double bottom line [of making money and doing good].”
Size doesn’t matter
But competition for distressed properties is increasing as the drought in luxury housing deals drags on. Meanwhile, the price of tax credits—a key currency in such deals—has plummeted by nearly a third, forcing Omni to scramble for more state and city subsidies to fill the gap.
“We used to be able to get deals done without subsidies,” says Mr. Schneur.
Omni’s rapid growth also presents challenges. By year’s end, it expects to have close to 5,000 units. For a firm whose two founders visited their early holdings as many as four times a week, the sheer scale of the portfolio now makes maintaining that degree of oversight difficult—even with the aid of a staff at its midtown headquarters that now numbers about 120.
“We can’t cut corners and be complacent,” says Mr. Vaughn. “If we continue to be humble and work hard, we will be fine.”
In fact, Mr. Vaughn and his partner are stepping up their act. Prior to the market collapse, Omni had been priced out of Manhattan. Mr. Schneur recalls one deal where Omni bid $20 million for a Manhattan building that went for $30 million.
Last month, Omni had better luck, buying its first Manhattan properties—two Section 8 buildings in Harlem with 53 units—for $5.5 million. Now, as a number of big, financially troubled properties, including Lawrence Gluck’s 1,230-unit Riverton in Harlem, make their way through foreclosure, they are weighing a bid. Even Manhattan’s vast middle-income oasis Stuyvesant Town-Peter Cooper Village looms as a potential target.
“Size doesn’t matter,” says Mr. Vaughn. “They fit within our philosophy of preserving decent affordable housing.”
It’s time for the release of TMP Directional Marketing & comScore’s Annual Local Search Study results.
Before we dive into the data, full disclosure: I preside over an interactive division at TMP.
ComScore has administered the study each of the last three years with the purpose of identifying media trends and consumer behavior relative to local search. Trending data provides good insights on how this has changed over those three years.
The study is comprised of two components: an online questionnaire completed by 4,000 respondents and a behavioral component courtesy of comScore’s more than 2 million users. The behavioral component is especially interesting because it provides direct observation of actual local search behaviors.
And Now, the Results…
Year over year, more digital channels become available to more consumers. So it’s no surprise that they’re increasingly being relied on for local business information. Search engines remain the “primary source” of information, while print media usage continues to decline.
Also on the decline is the number of local business searchers who own print directories. In 2009, this represented 84 percent of searchers, down from 89 percent in 2008. Print yellow pages (PYP) usage may be down, but Internet yellow pages (IYP) usage is up, possibly from loyal PYP users migrating online.
The rise of online media as a local business resource is expected. Also expected is the survival of offline media. There is still significant usage.
This illustrates the need for a diversified approach toward media investment in order to nurture maximum lead flow. This is especially true if you’re targeting mature adults (45 years and older). Offline media is still their primary local business resource, 40 percent prefer print directories while only 24 percent prefer search engines.
To understand usage declines, and also identify growth opportunities, it’s helpful to look at the frequency with which media is used.
For example, in the previous graph social media and mobile as “primary sources” of local business information represent 1 percent and 3 percent respectively — not something to get really excited about. However, consider that consumers use them every day or a couple times a week and you begin to take them more seriously (see below chart). Frequency indicates growing reference activity, and in this case it’s a reason to keep emerging advertising opportunities in social and mobile channels on your radar.
Google Maps: Number 1 with a Bullet
Google made significant gains in its share of local searches. Google Maps usage grew from 15 percent market share in the fourth quarter of 2008 to the number one local search site in the second quarter of 2009 with 24 percent market share, according to the comScore IYP/Local Combo Report.
Interestingly, the ascension of Google Maps usage almost directly corresponds with the transition from what was the 3-Pack last spring to what’s now the 10-Pack. Also exacerbating this trend is Google’s use of implicit searches early in 2009. This illustrates the need for national and local businesses to claim their local business listings, and also to ensure that they’re accurate.
Importance of Ratings and Reviews
From 2008 to 2009, usage of consumer ratings and reviews increased to 25 percent (+3) among IYP searchers and to 27 percent (+5) among general searchers. Additionally, people who use social networking sites for local business information are more likely to use consumer reviews (53 percent).
It’s interesting that, while overall usage of ratings and reviews is only 24 percent, its importance during the business selection process is 57 percent! Because users of ratings and reviews heavily rely on them to select a company to do business with, they should be a serious component of any marketer’s online strategy.
2010 Will be the Year of Mobile
Just kidding, it’s still a few years out. The data reveals that mobile search continues to grow as more consumers have access to smartphone devices. Sixty percent of smartphone users say they have conducted a local search on their phone, versus 19 percent of standard cell phone users that have data connection.
According to comScore, only 12 percent of the mobile devices in today’s marketplace are smartphones. As consumers upgrade their existing devices, we should begin to see the mobile segment become more important to local search.
In closing, a greater percentage of local business searchers expect business results to be within 15 miles from their starting location (63 percent, from 52 percent in 2007). Marketers already leveraging local search know this and have seen its benefits: leads that convert both online and offline.
Super Bowl 2010 commercials featured (again) on YouTube AdBlitz
Would marketers be smarter to take the money they’ll spend on Super Bowl 2010 commercials and use it to by YouTube ads instead?
Image by SESConferenceSeries via Flickr
Last year, the Super Bowl ranked in $213 million in advertising revenue, according to Kantar Media, until recently known as TNS Media Intelligence.And, for many marketers, that was money well spent. According to Nielson Company, the 2009 game was the most-watched Super Bowl ever, with 98.7 million viewers watching the Pittsburgh Steelers beat the Arizona Cardinals.
But, according to comScore Media Metrix, 128.1 million viewers watched more than 12 billion videos on YouTube.com in November 2009. This means that more Americans visit YouTube each month than watch the Super Bowl.
Oh, and according to a variety of sources, marketers are paying between $2.5 million and $2.8 million for a 30-second spot.
What’s a YouTube homepage masthead unit cost? Well, YouTube doesn’t publish its rate card. And homepage ads come in a variety of formats. But, knowledgeable sources say it costs hundreds of thousands of dollars to take over the YouTube homepage to reach tens of millions of viewers with an expandable masthead ad.
Now, YouTube doesn’t attract an audience of 128.1 million viewers each and every day. So, comparing YouTube’s monthly audience with the Super Bowl’s daily audience is comparing apples to oranges.
But, four YouTube homepage mastheads delivered 141 million impressions for the Las Vegas Convention and Visitor’s Authority’s “Vegas Bound” campaign last year. So, advertisers know how to compare apples to oranges.
I talked with Aaron Zamost of Google Corporate Communications this week, hoping to stir up a little partisan controversy between offline and online advertising.
Zamost was in Washington, D.C., which knows all about partisan controversy. But, it appears that President Barack Obama’s request to be more bipartisan was heard by YouTubers — because Zamost reached across the aisle to CBS instead of bashing broadcast TV.
He noted that YouTube AdBlitz 2010 would let YouTubers watch the Super Bowl commercials the minute they air on Sunday, February 7. When the game ends, YouTube will let visitors vote for their favorite 2010 commercial until February 14. And the winning ad will receive ultimate video glory with YouTube homepage recognition.
Zamost also said that smart marketers have already figured out that their target audience is coming to the Internet to view Super Bowl ads. So, they are building up to the big game with behind the scenes campaigns — like KiaSorento’s channel, which provides a sneak peak of Kia’s first big game commercial, which stars the all-new 2011 Sorento and an unbelievably colorful cast of characters.
Oh, and smart marketers will also use YouTube after the Super Bowl to enable fans of their commercials to post text comments, upload video responses, and embed it in their blogs. And, if you don’t think Super Bowl commercials can have fans, consider this: A recent Nielsen study of viewing patterns reported that 51 percent of viewers watch the game mostly for the commercials.
“Smart marketers are using YouTube to get more bang for their Super Bowl buck,” said Zamost.
Wow. A bipartisan pitch from Washington, D.C. Who knows, maybe YouTube can do something with Congress next.
Hyatt Hotels Corp., responding to public outcry, political pressure, and threatened boycotts, yesterday offered the 98 housekeepers it fired last month new jobs at their old wages, a move that was met with mixed reaction by those who protested the firings.
Hyatt said it is offering the housekeepers at the three Boston-area Hyatts, who had been abruptly replaced by lower-wage workers, full-time positions with United Service Cos., a Chicago-based staffing organization that the hotel chain uses for contract labor. Hyatt said those who accept the positions will be paid at their full Hyatt wage rate through the end of next year.
Those who don’t take the jobs will be offered training and career assistance and will receive their Hyatt wages through the end of March or until they land a permanent job.
“Every housekeeping employee who wants a job will have one,’’ Phil Stamm, general manager of the Hyatt Regency Boston, said in a statement. “That’s our promise.’’
Hyatt’s decision to fire its Boston housekeepers Aug. 31, as a cost-saving move, provoked an extraordinary standoff between a group of $15-an-hour workers and their allies – among them Governor Deval Patrick – and a billion-dollar company.
The housekeepers at the three Hyatt hotels – the Hyatt Regency Boston, the Hyatt Regency Cambridge, and the Hyatt Harborside at Logan International Airport – were replaced by employees of an Atlanta outsourcing firm, Hospitality Staffing Solutions, who make $8 an hour.
The housekeepers, some of whom had worked for the chain for more than 20 years, have said they were told to train the workers as vacation fill-ins, a claim Hyatt and Hospitality Staffing Solutions deny.
In addition to yesterday’s job offer, Hyatt said it is extending health care coverage through the end of March for employees who take positions at the hotels, hospitals, and shopping centers that United Services Cos. serves. After that, the housekeepers can get health benefits through the outsourcing company itself. Housekeepers who don’t want to take one of these jobs will be offered training and career assistance through the employment services companies Manpower and Right Management.
Rick Simon, president of United Service Cos., said the housekeepers who get temporary placement with his company could end up getting hired permanently. “I’m positive by 2010 and probably long before 2010,’’ he said, “all will be placed in permanent jobs at a similar wage scale’’ to what they were earning at the Hyatt.
The reaction to Hyatt’s offer was mixed. A spokesman for Patrick, who earlier this week said that he would direct state employees on official business to boycott the Hyatt, said the governor spoke to local Hyatt management and is reviewing the proposal.
“He wants to ensure that this is a proposal the workers can depend on and feel is fair,’’ said spokesman Kyle Sullivan. “Having been treated so unfairly, they are understandably hesitant to trust any proposal short of restoring them their jobs.’’
The Boston Taxi Drivers Association, which also threatened a boycott, called off the effort yesterday.
“It is not the best of remedies, but at least these workers will have jobs at the same rate of pay with benefits through 2010 and will receive financial support and retraining opportunities to secure permanent jobs,’’ said union representative Donna Blythe-Shaw.
But housekeeper Corporina Belis was not interested in the offer. Belis, who worked at the Boston Hyatt for 24 years and has been sending $300 a month to her mother who lives in the Dominican Republic, wants her old job back. “I know my job,’’ said Belis, 62, who added that she was training a Hospitality Staffing Solutions worker the day she was fired. “That’s my life, my job.’’
Likewise, officials from Unite Here, Local 26, a union that represents hotel workers, were not happy with Hyatt’s proposal. The union organized a rally for the Hyatt workers last week, even though the housekeepers are not unionized.
“Hyatt’s latest proposal is simply a smoke screen designed to trick people in to thinking Hyatt is doing the right thing,’’ union president Janice Loux said in a statement.
“It does not provide the women with the one thing they really deserve,’’ Loux said. “These women have made it clear that they want to be returned to the jobs they have held for years, and Hyatt’s PR scheme does not diminish their determination.’’
William J. Holstein, author of the book “Manage the Media,’’ which addresses how bad publicity can affect a company, agrees that Hyatt didn’t go far enough.
“Helping people get jobs at a temporary employment agency doesn’t feel right,’’ Holstein said. “The logic of this is they have to admit they made a mistake, say they were insensitive, and do the right thing. It’s a minor league issue, they’re a global company and this has really hurt them.’’
There’s been a lot to mull over this year about gender equality in finance and business.
One recent survey by Catalyst, a nonprofit group that promotes women in business, found that 19% of women have lost their jobs in the past two year, compared with 6% of men. Then, there was Jack Welch’s comment a few months ago that women who take time off for their family are doomed to been passed over for high power jobs.
JP Morgan’s
Heidi Miller, No. 1 Woman Banker
Other studies are more upbeat. The Boston Consulting Group says women will drive the post recession economy because of rising female employment and because women are narrowing the wage gap with men.
Now US Banker magazine is finding some bright spots in its annual “25 Most Powerful Women in Banking” issue. Calpers, the giant California pension fund, hired the first female CEO, Anne Stausboll, in its 77 year-history, while Bank of America is said to be grooming Sallie Krawchek, who was recently hired as head of the bank’s Global Wealth and Investment Management unit, as a possible successor to CEO Ken Lewis.
At the top of the US Banker list, for the third straight year, is Heidi Miller, J.P. Morgan’s CEO of Treasury and Securities Services. One notable newcomer to the list is BBVA Compass retail chief Shelaghmichael Brown, who helped with that bank’s recent acquisitions in the US.
The magazine editors rank the women based criteria such as one-year performance, the results of business initiatives, management style and overall influence.
Here’s the full list, and for more rankings click here.
The 25 Most Powerful Women in Banking 2009
1) Heidi Miller, JPMorgan Chase & Co.
2) Karen Peetz, BNY Mellon
3) Pamela Joseph, U.S. Bancorp
4) Barbara Desoer, Bank of America
5) Carrie Tolstedt, Wells Fargo
6) Peyton Patterson, NewAlliance Bancshares
7) Deanna Oppenheimer, Barclays PLC
Mary Callahan Erdoes, JPMorgan Chase
9) Diane Thormodsgard, U.S. Bancorp
10) Julie Monaco, Citigroup
11) Lynn Pike, Capital One Bank
12) Cara Heiden, Wells Fargo
13) Avid Modjtabai, Wells Fargo
14) Donna Demaio, MetLife Bank
15) Mollie Hale Carter, Sunflower Bank
16) Diane D’Erasmo, HSBC USA
17) Ellen Alemany, Citizens Financial Group and RBS Americas
18) Anne Arvia, Nationwide Bank
19) Anne Finucane, Bank of America
20) Ellen Costello, Harris Bankcorp
21) Colleen Johnston, TD Bank Financial Group
22) Shelaghmichael Brown, BBVA Compass
23) Diane Reyes, Citigroup
24) Kay Hoveland, K-Fed Bancorp & Kaiser Federal Bank
Google today launched a new feature that organizes articles on the web in a way that resembles print magazines, called Google Fast Flip. Marissa Mayer, the search engine giant’s VP of search products and user experience, who unveiled the feature at TechCrunch 50 this afternoon, explained that Google founder Larry Page had questioned why the web wasn’t similar to a print magazine, where the content is already available for you to read as soon as you turn the page. Using the Google Fast Flip page, people can click on a topic — say, entertainment — and scroll through small screenshots of articles on that topic from various sites, such as (in the case of entertainment) Us Weekly, People and Seventeen. Click on an article to view a larger image of it and a second time to read it on its original site. Or you can simply scroll through a string of articles from 30 well-known news brands, including the Washington Post, Slate and BBC News, publishers with which Google will share advertising revenue.
Prior to the Fast Flip unveiling, however, startups focused on advertising and monetization took the stage to show off their wares to a panel of judges, which included Mayer and Zappos’ CEO Tony Hsieh. Two of the startups that presented, SeatGeek and Rackup, have a gambling-like feel. For sports fans and concert goers, SeatGeek forecasts for users the prices of event tickets on secondary markets, such as StubHub and eBay — and takes a 7-10 percent cut of each sale. Rackup, meanwhile, holds online auctions that take place over very short time periods (e.g. 60 seconds) during which people can bid for gift cards to their favorite stores. And it adds a sweetener: It will increase the money value of the gift card a person is bidding on based on how early they placed their bid and the size of it relative to other competitors in the auction.
Walmart loves to shock and awe. City-size stores, absurdly low prices ($8 jeans!) and everything from milk to Matchbox toys on its shelves. And with the recession forcing legions of stores into bankruptcy, the world’s largest retailer now apparently wants to take out the remaining survivors.
Thus, the company is in the beginning stages of a massive store and strategy remodeling effort, which it has dubbed Project Impact. One goal of Project Impact is cleaner, less cluttered stores that will improve the shopping experience. Another is friendlier customer service. A third: home in on categories where the competition can be killed. “They’ve got Kmart ready to take a standing eight-count next year,” says retail consultant Burt Flickinger III, managing director for Strategic Resources Group and a veteran Walmart watcher. “Same with Rite Aid. They’ve knocked out four of the top five toy retailers, and are now going after the last one standing, Toys “R” Us. Project Impact will be the catalyst to wipe out a second round of national and regional retailers.” (See 10 things to buy during the recession.)
Though that’s bad news for many smaller businesses that can’t compete, Walmart investors have clamored for this push. Despite the company’s consistently strong financial performance, Wall Street hasn’t cheered Walmart’s growth rates. During the 1990s, the company’s stock price jumped 1,173%. In this decade, it’s down around 24% (Walmart’s stock closed at $51.74 per share on Sept. 3). “Walmart is under excruciating pressure from employees and frustrated institutional investors to get the stock up,” says Flickinger. (Read “Can Toys “R” Us Sell Toilet Paper?”)
Many analysts believe that the store-operations background of new CEO Mike Duke will keep investors quite happy. Though the recession finally caught up to Walmart last quarter, when the company reported a 1.2% drop in U.S. same-store sales, Walmart was a consistent winner during the worst days of the financial crisis, as frugal consumers traded down. While most retailers are shutting down stores, Walmart has opened 52 Supercenters since Feb. 1. Joseph Feldman, retail analyst at Telsey Advisory Group, estimates that each store costs Walmart between $25 and $30 million. In order to continue the momentum that it has picked up during the retail recession, over the next five years the company plans to remodel 70% of its approximately 3,600 U.S. stores.
So what does a Project Impact store look like? One recent weekday afternoon I toured a brand new, 210,000-sq.-ft. Walmart in West Deptford, N.J., with Lance De La Rosa, the company’s Northeast general manager. “We’ve listened to our customers, and they want an easier shopping experience,” says De La Rosa. “We’ve brightened up the stores and opened things up to make it more navigable.” One of the most noticeable changes is that Project Impact stores reshape Action Alley, the aisles where promotional items were pulled off the shelves and prominently displayed for shoppers. Those stacks both crowded the aisles and cut off sight lines. Now, the aisles are all clear, and you can see most sections of the store from any vantage point. For example, standing on the corner intersection of the auto-care and crafts areas, you can look straight ahead and see where shoes, pet care, groceries, the pharmacy and other areas are located. And the discount price tags are still at eye level, so the value message doesn’t get lost. (See how Americans are spending now.)
“They are like roads,” De La Rosa says proudly. “And look around, the customers are using them. We’ve already gotten feedback about the wider, more breathable aisles. Our shoppers love them.”
The layout is also smarter. “You can kind of guess where everything is going to be,” says Sharon Tilotta, 73, a shopper in the West Deptford store. The pharmacy, pet foods, cosmetics and health and beauty sections are now adjacent to the groceries. In the past, groceries and these other sections were often at opposite ends of the store, which made it more difficult for someone looking to pick up some quick consumables to get in and out of Walmart. “Under Project Impact, Walmart is providing more of a full supermarket experience within its walls,” says Feldman. “The biggest complaint against them has always been that it takes a long time to get through everything. This definitely improves efficiency.” De La Rosa also points out the party-supply section. Favors, wedding decorations, cards and scrapbooks are all in one area. “In the past, these products would be in three different places,” he says.
And although Walmart won’t admit to targeting specific competitors – “We’re just listening to what our customers want,” De La Rosa says – it’s clear that, under Project Impact, Walmart will make major plays in winnable categories. The pharmacy, for example, has been pulled into the middle of the store, and its $4-prescriptions program has generated healthy buzz. With Circuit City out of business, the electronics section has been beefed up. Walmart is also expanding its presence in crafts. Sales at Michael’s Stores, the country’s largest specialty arts-and-crafts retailers, have sagged, and Walmart sees an opportunity. Stores are chock-full of scrapbooking material, baskets and yarns. “Look, they’re selling the stuff that accounts for 80% of Michael’s business, at 20% of the space,” says Flickinger. “It’s very hard for any company to compete with that.” (Read “That Viral Thing: People of Walmart.”)
Apparel, one of Target’s traditional strengths, gets a prominent position at the center. The color palettes of the shirts and dresses are brighter and more appealing than they’ve been in the past. “Walmart has figured out fashion for the first time in 47 years,” Flickinger says. “They’ve gone from a D to an A-minus.” Briefs and underwear have been shuttled to the back. “That’s a smart move,” Flickinger says. “People know to come to Walmart for the commodity clothing. Now, they have to walk past the higher margin, more fashionable merchandise to get what they need.”
Of course, Project Impact isn’t perfect. You’d think that if Walmart was going to open a massive new store with a cutting-edge layout, the company would at least put a sign up. In West Deptford, it’s easy to miss the entrance to the Walmart – which is buried in the back of a parking lot – while driving along a main thoroughfare. And of course, customers will always nitpick. One elderly shopper complained about a shortage of benches in the store (she needed a rest). Another had a more esoteric, yet legitimate, gripe. “Their meat is leaky,” says Jeff Winter, 30, a West Deptford shopper. “And instead of giving you a wet wipe to clean it off, they give you a dry towel. How’s that going to prevent E. coli or whatever?” (See which businesses are bucking the recession.)
What analysts really want to see from Project Impact, however, is a faster pace of implementation. “The biggest hurdle facing Walmart is the speed with which they can roll this out,” says Feldman. As more Project Impact stores pop up, the existing stores appear worse by comparison. For example, while the merchandise at the Project Impact store outside of Philadelphia really speaks to that particular market – there’s tons of Eagles and Phillies gear – at one regular discount store outside New York City, Minnesota Twins and Seattle Mariners pajama pants wasted away on the racks. There were plenty of associates staffing the electronics section at the Project Impact store; at the discount store, five frustrated shoppers waited in line for help from a customer-service rep. Soon, it was closer to 10.
What about the friendly service? In West Deptford, the associates were sunny and bright. At the New York–area discount store, not so much. “You’ll notice we’ve been in the store for two hours, and no one has even said hello to us,” Flickinger says after he and I toured that store. He’s right, we weren’t feeling any love. But if Project Impact keeps picking up momentum, many more Walmart salespeople, and shareholders, should be smiling.
Three or four days a week, Boston-area entrepreneur Hooman Hodjat stops into a second-floor office just across the street from Boston’s South Station.
One day, he’ll use the conference room to meet with potential investors. The next day, he may be found at a table, working the phone lines, with a fresh cup of coffee in hand.
And for all this, he pays just $100 a month.
He’s a member at WorkBar, a pioneering new business that offers office space, like a gym offers exercise space.
Hodjat and other WorkBar members sign up, pay monthly dues and come in as often as they want to work.
Instead of treadmills and free weights, WorkBar has laptop charging stations, lounges and free coffee.
WorkBar director Bill Jacobson said the concept evolved after he realized that today’s offices don’t reflect today’s workers.
“The people who are working at home say they miss the other people from the office,” he said.
So far, WorkBar, which officially launches next month, offers two types of memberships. Community members pay $100 a month and must sign on for a six-month commitment. They get to use almost all the services, except the private desks, which are set aside for dedicated members, who pay $400 a month.
The 129 South St. shop is open Monday through Friday, 8:30 a.m. to 5:30 p.m.
And at least three days a week, Hodjat is there.
He is one of the founders of Pickup Zone, a new service aimed at offering consumers relief from unattended package deliveries. With PickUp Zone, people can have their packages delivered to a neighborhood retailer, who will hold them until the person can pick them up.
As a result, Hodjat said, he’s often in the city, meeting with retailers and potential clients.
The convenience is great, said Hodjat, who lives in Framingham.
“My target market is in the city, so I get on the commuter rail, get out at South Station, and walk across the street for my meetings,” he said.
BOSTON — The chief political consultant for Cape Cod businessman Christy Mihos said Tuesday his client lost the 2006 gubernatorial race solely because he ran as an independent.
Conservative commentator and author Dick Morris also predicted that Mihos will beat fellow Republican Charles Baker in the 2010 GOP primary and Gov. Deval Patrick, a Democrat, in the general election because of his opposition to Big Dig spending and the “considerable financial advantage” the multimillionaire brings to the campaign.
“I don’t think Baker is going to be a serious problem,” Morris told The Associated Press in an interview. “I think he’s subject to many of the same negatives that Patrick is. Patrick raised our taxes; Baker raised our tolls.”
The criticism harkened back to Baker’s work in the Weld and Cellucci administrations, when he served as the top finance official in the Cabinet from 1994 to 1998. During that time, the state sought to finance the $15 billion Central Artery tunnel project, which has triggered toll increases.
More recently, Patrick signed a 25-percent sales tax hike into law.
Yet Morris didn’t limit his attack there. He criticized Baker, who went on to become president of Harvard Pilgrim Health Care, for helping negotiate a state receivership for the troubled insurer and then taking a $1.5 million salary package from the now-profitable company until he resigned in July to run for governor.
“I wonder how popular health insurance companies are,” Morris said. “Let’s put it this way: I’d rather run a hedge fund.”
A Baker spokesman dismissed the complaints.
“Looks like Christy Mihos is back negatively attacking Republicans again,” Baker spokesman Andrew Goodrich said. “Christy’s negative campaign is one reason elected Republican officials from across the state are flocking to support Charlie Baker and see Charlie as our only hope to defeat Deval Patrick.”
Mihos garnered only 7 percent of the vote in 2006, when he squared off against Patrick and Republican Lt. Gov. Kerry Healey. The Christy’s convenience store magnate is running as a Republican this time around.
Mihos has hired Morris to develop strategy. He is a newspaper columnist and Fox News analyst who once served as Democrat Bill Clinton’s political adviser.
His work with Mihos is not the New Yorker’s first venture into Massachusetts politics. He previously ran Ed King’s successful campaign against Democrat Michael Dukakis, and also worked on state campaigns to limit property tax increases and elect William F. Weld as governor in 1990 and 1994.
Morris said Mihos’s candidacy will resonate with voters because he fought against cost escalation in the Big Dig project while a member of the Massachusetts Turnpike board of directors. The consultant also said Mihos knows how to cut government spending but won’t be afraid to spend his own money promoting his candidacy — perhaps as early as this fall.
He said Mihos lost 2 1/2 years ago only because he ran as an independent.
“It was a basic mistake to think that as an independent in a highly polarized, partisan year,” Morris said. “I think that people were not in the mood for a third choice.”
In both the size and quantity of proposed deals, the past 24 months have been busier than ever for biopharma dealmakers. From industry giants like Genentech and Biogen Idec(Nasdaq: BIIB) to tiny players such as Mirus Bio, nearly every such drugmaker has generated at least rumors of a takeover.
Why now?
There are many factors coming together to make biopharmaceutical drugmakers attractive acquisition targets right now, but two particularly stand out. First, big pharmas like Pfizer(NYSE: PFE), Bristol-Myers Squibb, and Eli Lilly(NYSE: LLY) are currently flush with cash. However, they’re also facing patent expirations and rising generic competition against some of their best-selling flagship drugs.
These drugmakers’ cash has to go somewhere, either through acquisitions, share buybacks, dividend payments, or paying down debt. Some of these options don’t make very much sense right now; with interest rates at historical lows, for example, now’s not the time for big pharma to pare down their debt levels. In addition, some drugmakers park a good portion of their cash outside the U.S. for tax reasons, making foreign biopharma acquisitions more attractive.
Given their complex molecular nature and manufacturing processes, many biologically derived drugs and vaccines have innate natural protections against generic competition. In many cases, it can be nearly impossible to make a generic copy of a biopharmaceutical drug, even after its patents have run out.
There are plenty of smaller variables at work, too:
The weak dollar means foreign large-cap pharmaceutical firms can acquire U.S. drugmakers more cheaply.
The biopharma industry has matured in the last 10 years.
All in all, the the environment for biopharma deals has never been stronger.
What does Big Pharma want?
As with many previous deals for small-molecule drugmakers in the past, big pharma has generally offered its biggest premiums and juiciest deals to mid-sized biopharmaceutical firms with mature assets.
Here’s a chart of some of the biggest biopharma acquisitions or proposed deals in the past 24 months:
The deal
Share-price premium*
Main reason for offer
Genentech acquired Tanox for $919 million.
47%
To gain rights to Tanox’s share of the asthma drug Xolair
AstraZeneca acquired MedImmune for $15.6 billion .
21%
To get Synagis and vaccines
Takeda acquired Millennium Pharmaceuticals for $8.8 billion.
53%
Multiple-myeloma drug Velcade plus biologics pipeline
Bristol-Myers proposed to buy ImClone Systems(Nasdaq: IMCL) for $4.5 billion.
30%
Cancer drug Erbitux plus biologics pipeline
Roche proposed to buy Genentech for $43.7 billion.
8.8%
To gain more control over Genentech
*Compared to the day before the offer was made.
In addition to heated acquitision activity, drugmakers have forged a slew of record-breaking partnership deals for biopharmaceutical assets. For example, in 2006 GlaxoSmithKline struck a deal with Genmab, worth as much as $2.1 billion, for one of the latter company’s late-stage monoclonal antibody drug candidates.
Many of these deals involved drug developers working with technologies that competitors have previously validated, but in recent months, large-cap pharma has even started to bite on new unproven technologies like Cell Genesys‘ GVAX cancer vaccine. However, these deals have generally drawn smaller amounts of up-front cash (and some bad outcomes, too).
What tempting targets remain?
Even as the biopharmaceutical sector grows by leaps and bounds in the 21st century, with drugs like Millennium’s Velcade, Genentech’s Avastin, and ImClone’s Erbitux entering the market, there are still very few independent pure-play biopharmas. This fact alone boosts these companies’ attractiveness to would-be acquirers.
Here’s a partial list of some of the juiciest biopharma assets potentially still up for grabs:
Technology to potentially develop a range of biosimilar drugs
Regeneron Pharmaceuticals
$1.7 billion
One approved compound, another that could compete broadly with Genentech’s Avastin
Other drugmakers also have interesting biopharmaceutical assets, like Biogen Idec, Elan(NYSE: ELN), and Genzyme. But for a variety of reasons, including their large size or the nature of their existing partnership agreements, they’d be more difficult for a potential buyer to acquire.
A year from now, I’ll be very surprised if every drugmaker on the above list remains independent. There are only so many mature biopharma assets to go around, and as the past months have shown us, big pharma isn’t afraid to snap them up.
Anne Fleming felt deeply confident as a negotiator—except whenever she entered an automotive dealership, where research shows that women pay more for cars than men.
So last October the former apparel executive in Pittsburgh launched a Web site called Women-Drivers.com, which offers negotiating tips, as well as reviews of female-friendly dealerships. In just nine months, the site has received reviews from several thousand women car shoppers. “We’ve gotten enough feedback to start ranking the female-friendliest dealerships,” says Ms. Fleming.
Despite a historic drop in U.S. auto sales, Women-Drivers.com is just one of scores of new automotive Web sites being launched that cater to car enthusiasts. For consumers, the Internet is helping to solve some of the most confounding aspects of buying a car, from comparing prices and reading reviews to getting tips on bargaining tactics. And the plethora of new sites for automotive buffs appears to demonstrate that Americans’ love affair with cars is alive and well.
Even as U.S. auto sales have fallen by about 30% this year from a year earlier, more than 100 new auto-related Web sites have been launched, says research group Hitwise. That brings the total number of such sites to nearly 5,000, more than for all but a few other industries. Since 2005, the ranks of automotive writers have grown to 2,700 from 1,600, says Autowriters.com, a site that tracks car writers for the auto industry.
Purchasing-related auto sites have generally experienced declining readership this year. But many sites that offer news and commentary and reviews have grown. Magazine stalwarts like Car and Driver, Road & Track, Automobile and Motor Trend now operate online editions. Fast gaining in the battle for car-news junkies is Autoblog, a five-year-old site whose motto is, “We obsessively cover the auto industry.”
Sexy Auto Spokescougars
TheTruthAboutCars.com is one of a slew of new sites for car buffs.
Almost no niche is too small. Online auto publications are appealing to readers based on geography ( DriveChicago.com ), type of car ( HybridSUV.com ), ethnic identity ( Latinos.onwheelsinc.com ), gender and even sexual orientation. At Gaywheels.com , readers can learn which auto makers do and don’t offer domestic-partner benefits to employees, as well as which vehicles are most popular among gays. “Gay men are four times more likely to own a Volkswagen than the average customer,” says Joe LaMuraglia, founder of the site.
Demand for automotive sites is increasing. A J.D. Power & Associates survey found that in 2008 more than 75% of car buyers conducted online research before shopping, up from 70% a year earlier. The popularity of cars online helps explain why General Motors Co. this month announced a joint venture to sell new cars through eBay Motors, the most visited online automotive site.
Some online auto entrepreneurs have struck it big. Kristin Varela was a single mom working for a Denver human-resources firm when she set about searching for the ideal vehicle for busing around children. “The only reviews I could find were basically by car buffs writing for gear heads,” she says.
So in 2004 she launched Motherproof.com , which reviewed cars from a maternal perspective. Among her questions: Were the seat belts simple enough for young children to fasten? Did it have enough cup holders? Could a young mom look hot in it? How did the reviewer’s children like the car?
Motherproof.com drew such strong traffic that advertisers flocked to it. In 2007, the site was purchased by Cars.com , one of the Web’s biggest automotive destinations, which hired Ms. Varela as its full-time editor. Every week, auto makers deliver new test cars to the driveways of young moms around the country who write reviews for Ms. Varela.
Sites devoted to electric-car coverage are particularly popular. Lyle Dennis, a neurologist at NewYork-Presbyterian Hospital, was hardly looking for a new career two years ago when he launched GM-Volt.com , a site that follows the electric-car efforts of General Motors. An electric-car enthusiast, Dr. Dennis was merely planning to post the occasional press release or news development about GM’s battery-powered Volt, a car not due out until 2010.
Blogger by Night
But the site drew so much traffic that GM began inviting Dr. Dennis to Volt-related events and offering him exclusive interviews with its top executives. Advertisers began paying him for space on the site. And upon completing his daily duties, including treating victims of stroke, Dr. Dennis began making daily posts to the site. Last week, when GM Chief Executive Fritz Henderson announced that the Volt would travel 230 miles per gallon of gasoline in city driving, Dr. Dennis flew in for the press conference. “This Web site has just added a whole new dimension to my life,” he says.
Kennedy Death Cuts Broad Health Bill Odds, Hatch Says
By Nicole Gaouette
Aug. 30 (Bloomberg) — Congress is less likely to pass sweeping health-care overhaul legislation following the death of Senator Edward Kennedy, a leading Republican said.
“You’re not going to get this big, broad Democrat spending bill — you’re not going to get Republican support,” Senator Orrin Hatch, a Utah Republican and close friend of the Massachusetts Democrat, said on CNN’s “State of the Union” program.
Hatch said Kennedy’s status as Congress’s leading liberal often convinced Democrats they could support deals he had struck with Republicans. “That’s why Senator Kennedy was so important,” Hatch said. “I don’t know if another Democrat has the same clout in Congress.”
Expanding coverage to nearly 50 million uninsured Americans and lowering health-care costs was Kennedy’s life’s work, colleagues said, and is now President Barack Obama’s top domestic priority. Lawmakers failed to get health-care bills through Congress before the August recess. Obama, who is pushing lawmakers to overhaul a health-care system that accounts for about 18 percent of the nation’s economy, said Aug. 20 that “we’re going to get this done one way or another.”
Hatch said Kennedy provided deep experience on health care, united factions within the Democratic Party and worked well with Republicans.
Kennedy’s Work
“Kennedy could bring together all of the base groups of the Democratic Party,” Hatch said on ABC’s “This Week,” recalling that Kennedy worked on health legislation for more than three decades. “In every case, he fought as hard as he could, but when he recognized that he couldn’t get everything he wanted, he worked with the other side. If he was here, I don’t think we’d be in the mess we’re in right now.”
Kennedy’s illness meant he was absent from Congress for much of the past year, though his staff said he kept abreast of the health debate through frequent phone calls. Senator Christopher Dodd, the Connecticut Democrat who temporarily took over from Kennedy as chairman of the Senate Health, Education, Labor and Pensions Committee, told the panel that Kennedy was watching their debate on C-SPAN television and calling him daily to offer feedback.
Four of the five congressional committees with jurisdiction over health have passed bills that would cost about $1 trillion over 10 years. The Senate Finance Committee has stalled over a number of issues, including whether to create a government-run insurance plan, require employers to provide workers with insurance, and impose new taxes that could range from taxing the richest Americans to levies on generous health plans.
Public Plan
Not all Democrats support the idea of a public plan, which Obama has said would be his preferred way to generate more competition among health insurers. Louisiana Senator Mary Landrieu told CNN she would “tend not to” support a bill that included a public option. “I think we can do it without a public option,” the third-term Democrat said. “Hopefully we can keep working. That’s what Ted Kennedy would want us to do.”
John Kerry, now the senior Democratic senator from Massachusetts and a member of the Finance Committee, said he was confident a health-care bill would be passed and he urged Republicans to avoid being “bound by ideology.”
“When we get reality on the table we can have a good conversation,” Kerry said on the ABC program. “I believe we can do this. I think better judgment will prevail.”
Senate Bill
When the Senate returns in September, it will take up the bill the Senate health committee put together in July, Dodd said on NBC’s “Meet the Press.” He said the bill is “sitting there,” ready to be worked on with the Finance Committee.
“If we can get these bills together and sit down with each other, we can produce a strong, vibrant, vitally needed national health care legislation on accessibility, quality and affordability,” Dodd said.
Health-care costs now account for about 18 percent of GDP, according to the president’s Council of Economic Advisers, and are projected to rise to 34 percent by 2040.
“The country cannot afford this, Dodd said on CNN. “How we get there is the challenge before us.”
Senator Maria Cantwell, a Washington Democrat, said bipartisan cooperation on the issue was crucial. “Doing nothing and thinking that we’re going to get out of this expense is not an option,” Cantwell said on CNN’s “State of the Union.”
“Getting true competition into the system and giving consumers choice is what the Democrats and Republicans should be joining ranks on,” Cantwell said.
Democrats Alone
Democrats including Senator Charles Schumer of New York have said that if Senate Finance negotiators — three Republicans and three Democrats — can’t reach a deal by Sept. 15, Democrats may have to pass the bill on their own.
The majority party could use a legislative maneuver called reconciliation which allows the Senate to pass a bill with 51 votes instead of the 60 typically needed for controversial pieces of legislation.
During the August recess, Finance Committee Chairman Max Baucus convened meetings of the six senators on the committee who are working on a bipartisan compromise.
Any agreement they reach would have to be coordinated with a plan passed by the Senate HELP committee. The three House committees with jurisdiction over health will meld their bills together after lawmakers return from recess. The House and Senate bills would have to be reconciled before being voted on by both chambers.
Protests at Meetings
The Senate adjourned on Aug. 7 and will reconvene on Sept. 8. Many of the town hall meetings lawmakers held to discuss health-care during the recess were disrupted by protests.
Administration officials have urged lawmakers to honor Kennedy by getting health reform passed.
“The best possible legacy is to pass health reform this year,” Secretary of Health and Human Services Kathleen Sebelius said recently. “Hopefully every step along the way they’ll ask themselves ‘What would Teddy do?’”
Dodd said Kennedy’s death will push his colleagues to work harder at passing legislation.
“We don’t have the luxury of wallowing in our grief; we’ve got to get up and get this done,” Dodd said. “We’re going to roll up our sleeves and do what Teddy would have done and get health-care done.”
BOSTON (Reuters) – Fresh details of large-scale cyber attacks against data processor Heartland Payment Systems Inc and supermarket chain Hannaford Brothers show the challenges facing the efforts of the U.S. credit-card industry to upgrade security measures.
While both companies say their computer networks met the tough new standards meant to prevent data breaches, Visa Inc said Heartland at least may have let its guard down.
The positions reflect broader disagreements in the industry, as squabbling between merchants and financial firms over technology and the cost of systems upgrades continues to impede progress, said Robert Vamosi, an analyst for California consulting firm Javelin Strategy & Research.
“They both need to fight fraud and they are fighting each other,” he said.
The financial stakes are getting higher. Fraud involving credit and debit cards reached $22 billion last year, up from $19 billion in 2007, according to California consulting firm Javelin Strategy & Research.
The security of consumer information came under renewed scrutiny on August 17 when a 28-year-old Florida man, Albert Gonzalez, was indicted along with two other unnamed hackers for breaching the computer networks of Heartland and Hannaford, both of which said they were in compliance with security requirements.
Those standards were set by a council that includes the world’s two largest credit card networks, Visa and MasterCard Inc; fast-food leader McDonald’s Corp; oil major Exxon Mobil Corp; and big banks Bank of America Corp and Royal Bank of Scotland Plc.
All these companies face rising costs linked to fraud and its prevention. Of the 275,284 complaints received last year by the government’s Internet Crime Complaint Center, 24,775 were tied to credit or debit card fraud, up from 13,033 in 2007 and 9,960 in 2006.
Yet some 5 percent of the largest retailers and restaurants still have not met compliance deadlines set in 2007, according to Visa.
Even companies that meet the standards could be vulnerable should they lower their guard, Visa security executive Ellen Richey said last spring in a speech critical of Heartland.
“It was the lack of ongoing vigilance in maintaining compliance that left the company vulnerable to attack,” she said in March.
Merchants, for their part, complain via trade groups like the National Retail Federation that Visa and MasterCard are asking them to pay more than their fair share for security upgrades.
Some retail executives also say Visa and MasterCard have been slow to adopt better encryption technology and cards with high-security computer chips because of the associated costs.
“I can’t even tell you how many sour, disgruntled calls I get from retailers,” said Gartner Inc technology consultant Avivah Litan, who also works with banks.
GOVERNMENT REGULATION?
At Heartland, Gonzalez was charged with stealing more than 130 million payment card numbers, a record. Previously the biggest such hacking case was at TJX Cos Inc, where federal prosecutors last year accused Gonzalez and others of conducting an electronic break-in starting in 2005 that companies said compromised as many as 100 million card numbers.
Gonzalez, who is awaiting trial, has pleaded not guilty to the charges related to TJX, which had not met security standards at the time of the data breach.
This time, prosecutors say Gonzalez and his co-conspirators penetrated Hannaford and Heartland’s systems in late 2007 with code known as “structured query language,” which the security standards require companies to protect themselves against.
They also charged the ring breached systems at convenience store operator 7-Eleven Inc, roughly in August 2007. The company said the breach only affected transactions at automated teller machines owned by a third party at some of its stores, and wouldn’t comment further.
A spokesman for Hannaford, a unit of Belgium’s Delhaize Group, said an audit unit of Verizon Communications Inc showed it met the security standards.
Heartland said through a spokesman that its systems had been checked by audit firm Trustwave of Chicago as recently as April 2008 — about four months after prosecutors say the hackers began their theft.
The security standards represent “the lowest common denominator and the bad guys have figured out how to get around some of the weaknesses,” the spokesman said.
A Verizon spokesman confirmed it had audited Hannaford and found it to meet the standards, but declined to elaborate. A Trustwave spokeswoman said the firm wouldn’t comment.
Security is critical to Heartland because it processes card payments for merchants, and its stock dropped sharply in the two months after the attack was discovered.
In response, Chief Executive Robert Carr has tried to reassure customers and stepped up calls for better data encryption.
Ultimately, should the payment card industry fail to get its act together, it could face more government regulation, said Cynthia Larose, an attorney at Mintz Levin in Boston.
“If the stakeholders cooperate, we would see much better security,” she said.
BOSTON — Under Massachusetts law, voters will choose the successor to Sen. Kennedy in a special election in January. But that’s too long to wait for many Democrats, because Massachusetts would be without what could be a crucial vote as the U.S. Senate debates health insurance reform, Kennedy’s lifelong goal.
Gov. Deval Patrick told WBUR on Wednesday that he supports a change in the law that would give him the authority to appoint an interim successor. “When you think about the momentous change legislation that is pending in the Congress today, Massachusetts needs two voices,” Patrick said.
Patrick said he got a call from U.S. Senate Majority Leader Harry Reid, who was concerned about how fast Massachusetts fills Sen. Kennedy’s seat. The Massachusetts Legislature is expected to come back in formal session some time in mid-September. Senate President Therese Murray and Speaker Robert De Leo are gauging sentiment towards changing the law. They won’t comment on where they stand.
Republicans, who are far outnumbered in the Legislature, oppose a change. On Wednesday, Senate Republican leader Richard Tisei declined to comment on legislation that would give the governor the power to appoint an interim successor.
“Right now we should all take a time out from politics and people should take some time to remember Sen. Kennedy and really pay tribute to all the work that he did for decades for the commonwealth of Massachusetts,” Tisei said. Last week, Tisei pointed out that when Republican Mitt Romney was governor, Democrats passed the law that removed his power to appoint a successor.
In his letter, Sen. Kennedy requested that whoever is appointed to fill his seat make an explicit commitment not to run in the special election that will now be held next January.
It’s been a quarter century since there was a race for an open Senate seat in Massachusetts. That’s when John Kerry was elected.
Among the Democrats considered to have an interest in running are Boston’s two congressmen, Mike Capuano and Stephen Lynch. Democratic political consultant Dan Payne says Attorney General Martha Coakley is also considered a contender.
“There’s a lot of pent-up demand in Massachusetts to elect a woman, especially to the United States Senate, so she’d have that advantage,” Payne said. “Money becomes a very big deal in a special election, because you have to raise a bundle in a hurry, so anybody who’s contemplating this is going to have to think about at least $2 to $3 million for a short race, and that rules out a fair number of people who might otherwise be interested.”
Congressman Barney Frank, chairman of the House Financial Services Committee, said Wednesday he would not run for the Senate. Congressman Ed Markey said it’s too soon to talk about who will succeed Sen. Kennedy.
In the money race, former Congressman Marty Meehan, an architect of campaign finance reform, has the advantage. He has $4.8 million in his federal campaign account, but he said he is focused on running the University of Massachusetts at Lowell for now.
Sen. Kennedy’s widow, Victoria Reggie Kennedy, has also been mentioned as a potential candidate, as has his nephew, former Congressman Joseph Kennedy.
On the Republican side, political consultant Eric Fehrnstrom said that in a short race in a state dominated by Democrats, the most obvious Republican candidates are those wealthy enough to finance their own campaigns. Among the people who fit that bill is businessman Chris Egan, the son of Richard Egan — the founder of EMC, the large Hopkinton data storage company.
Fehrnstrom said he would expect Chris Egan to take a serious look at it. “We don’t know much about him at this point,” he said, “but I think that really presents an opportunity for candidates like him or other ambitious up-and-coming Republicans who want to make a name for himself or herself.”
Fehrnstrom predicts that Egan or another fresh Republican candidate will do what Mitt Romney did in his run against Ted Kennedy in 1994: Run and lose, but make a name for himself for the future.
South Shore merchants use Twitter to spread the word
By Steve Adams – The Patriot Ledger
MILTON —
When the newly-opened Abby Park restaurant in Milton prepared to add lunch service this week, it announced the news on its Twitter page. The restaurant just opened this month and already has 149 people following its “tweets,” the 140-character messages that are the standard mode of communication on Twitter.
“Marketing has taken on a new face,” restaurant owner Vance Welch said. “We’re looking at Twitter as we build a base.”
Twitter hasn’t yet found a way to profit off of its addictive social media site, despite reaching more than 20 million users monthly. But a growing number of South Shore businesses are finding a way to raise their profiles using Twitter’s free bully pulpit.
For the Greater Boston Running Company, Twitter is an opportunity to build an ongoing dialogue with customers and attract new ones.
Sam Pitts, manager of the company’s store at Derby Street Shoppes in Hingham, tweets several times a day. Some promote store products, but others link to news about the running community in Greater Boston or other topical items.
Giving a newsy flair to the site makes it more likely that people will visit, Pitts said. On Wednesday, he linked to a USA Today story about health risks associated with flip-flops. “Play it safe and pick up some new Reefs at the store ” he added. Another post linked to a review of runners’ watches on the New York Times’ Gadgetwise blog.
“We try to post information that people are interested in,” said Pitts, who has 280 “followers,” Twitter parlance for those who elect to receive all tweets from a user. “We’ve actually had customers come in the store because of what we’ve been doing on there.”
To recruit followers, Pitts searches Twitter for people who are following other running sites in the Boston area. Often, they reciprocate and begin following the store’s site.
“We get direct access to a customer base in terms of getting our product out there, and we get to see what people are talking about,” Pitts said.
Perhaps no sector of the retail industry in the Boston area is taking advantage of Twitter more than restaurants.
Anny Deirmenjian, an account manager for Image Unlimited Communications in Winchester, tweets on behalf of clients such as Burtons Grill in Hingham.
“People feel a real connection with social media, Deirmenjian said. “They have a part in it and we try to do updates via Twitter every day if we can.”
Promoting celebrity sightings – either in advance or after the fact – is a popular strategy in the restaurant industry.
Abby Park recently tweeted that New England Cable News’ “TV Diner” would be filming an upcoming episode at the 160-seat restaurant.
After a newspaper gossip column reported that New Kids on the Block singer Jordan Knight was spotted dining at Burton’s, Deirmenjian posted a link to the story.
“It’s a good response because the people can follow what’s going on at the restaurant,” she said. “Maybe next time we’ll do it as it’s happening.”
Followers of Abby Park on Twitter can expect nearly daily updates, mainly on dinner specials.
The Twitter page augments Abby Park’s regular Web site, which invited visitors to sign up to receive e-mail alerts. More than 2,000 people registered before the restaurant opened, Welch said.
But Twitter users tend to check their accounts more frequently, Welch said, giving it an advantage over Facebook.
Twitter also is serving as a new outlet for help-wanted ads. The Kings entertainment complex that is opening a new location at Legacy Place in Dedham next month announced a job fair on its Twitter page this week.
“We plan on ramping up our Twitter presence as we get closer to launch as we see it to be an important marketing tool that will allow us to connect with the community and those interested in our brand,” said Josh Rossmeisl, Kings’ general manager, in an e-mail.
A recent example of the power of social media took place on Tuesday when Burtons Grill in Virginia Beach, Va., launched a two-for-one promotion using Facebook, MySpace and Twitter to contact 1,500 diners. Reservations began streaming in within minutes, and the restaurant’s sales tripled that of the average night.
“We were blown away by what happened and how powerful this new medium is when used correctly,” said Kevin Rowell, owner of Burtons.
By CALVIN WOODWARD and GLEN JOHNSON, Associated Press Writers Calvin Woodward And Glen Johnson, Associated Press WritersThu Aug 27, 1:41 am ET
HYANNIS PORT, Mass. – The greatest heights eluded Ted Kennedy over a lifetime of achievement and pain. No presidency. No universal health care, chief among his causes.
Instead, Kennedy built his Washington monument stone by stone, his imprint distinct on the Senate’s most important works over nearly half a century. He toiled across the Potomac River from the graveyard of his fallen brothers.
The last of the Kennedys who fascinated the nation with their ambition, style, idealism, tragedies — and sometimes sheer recklessness — Edward Moore Kennedy died late Tuesday night at 77. A black shroud and vase of white roses sat Wednesday on his Senate desk, which John Kennedy had used before him.
So dropped the final curtain on “Camelot,” the already distant era of the Kennedy dynasty.
The Massachusetts senator‘s extended political family of fellow Democrats and rival Republicans, steeled for his death since his brain-tumor diagnosis a year ago yet still jarred by it, joined in mourning. Kennedy was the Senate’s dominant liberal and one of its legendary dealmakers.
Just last year he jumped into a fractious Democratic presidential nomination fight to side with Barack Obama, giving the Illinois senator a boost that had the air of a family anointment.
“For his family, he was a guardian,” Obama said Wednesday. “For America, he was a defender of a dream.”
The president, vacationing in Martha’s Vineyard, was awakened after 2 a.m. and told of Kennedy’s death. He spoke soon after with the senator’s widow, Victoria, and ordered flags flown at half-staff on all federal buildings.
Kennedy will be buried Saturday at Arlington National Cemetery after a funeral Mass in Boston, where Obama is to deliver a eulogy.
Kennedy will lie in repose at the John F. Kennedy Presidential Library and Museum in Boston before that.
Also buried at Arlington, the military cemetery overlooking the capital city, are John and Robert Kennedy; John Kennedy’s wife, Jacqueline; their baby son, Patrick, who died after two days, and their stillborn child.
To Americans and much of the world, Kennedy was best known as the last surviving son of the nation’s most glamorous political family. Of nine children born to Joseph and Rose Kennedy, Jean Kennedy Smith is the only one alive.
To senators of both parties, he was one of their own.
“Even when you expect it, even when you know it’s coming, in this case it hurts a great deal,” said Democrat Patrick Leahy of Vermont.
Politicians also calculated the consequences for Obama’s push for expanded health coverage. For several months, at least, Kennedy’s death will deprive the Democrats of a vote that could prove crucial for his signature cause of health reform.
His illness had sidelined him from an intense debate that would have found him at the core any other time. Conservative Sen. Orrin Hatch of Utah, his improbable Republican partner on children’s health insurance, volunteerism, student aid and more, said the Senate probably would have had a health care deal by now if Kennedy had been healthy enough to work with him.
“Iconic, larger than life,” Hatch said of his friend. “We were like fighting brothers.”
He was the last of the famous Kennedy brothers: John the assassinated president, Robert the assassinated senator and presidential candidate, Joseph the aviator killed in action in World War II when Ted was 12.
He lost his sister, Eunice Kennedy Shriver, less than two weeks ago, saw the bright promise of nephew John F. Kennedy Jr. end in a plane crash in 1999 and struggled with excesses of his own until he became a settled elder statesman.
Like Obama, Kennedy was a master orator. But the words that live for the ages seem to be those he uttered in tragedy or defeat.
Older Americans remember his eulogy of Robert Kennedy, when he asked history not to idealize his brother but remember him “simply as a good and decent man who saw wrong and tried to right it, saw suffering and tried to heal it, saw war and tried to stop it.”
Remembered, too, is his speech conceding the 1980 Democratic presidential nomination to the incumbent Jimmy Carter. “For all those whose cares have been our concern, the work goes on, the cause endures, the hope still lives and the dream shall never die,” he said.
By then, his hopes of reaching the White House had been damaged by his behavior a decade earlier in the scandal known as Chappaquiddick.
On the night of July 18, 1969, Kennedy drove his car off a bridge and into a pond on Chappaquiddick Island, on Martha’s Vineyard, and swam to safety while companion Mary Jo Kopechne drowned in the car. He pleaded guilty to leaving the scene of an accident; a judge said his actions probably contributed to the young woman’s death. He received a suspended sentence and probation.
Kennedy’s legislative legacy includes health insurance for children of the working poor, the landmark 1990 Americans with Disabilities Act, family leave and the Occupational Safety and Health Administration. He was also key to passage of the No Child Left Behind Education law and a Medicare drug benefit for the elderly, both championed by Republican President George W. Bush.
In the Senate, Republicans respected and often befriended him. But his essential liberalism marked him as a lightning rod, too. He proved a handy fundraising foil motivating Republicans to open their wallets to fight anything he stood for.
In 1980, Kennedy’s task of dislodging a president of his own party was compounded by his fumbling answer to a question posed by CBS’ Roger Mudd: Why do you want to be president?
“Well, I’m, uh, were I to, to make the, the announcement, to run, the reasons that I would run is because I have a great belief in this country,” he began.
It’s a question that all savvy politicians ever since make sure won’t catch them unprepared.
In his later years, Kennedy cut a barrel-chested profile, with a swath of white hair, a booming voice and a thick, widely imitated Boston accent. He coupled fist-pumping floor speeches with charm and formidable negotiating skills.
“I think that once he realized he was never going to be president — that that was not the legacy he had to follow — he really worked at becoming the best senator he possibly could,” Leahy said. “And he did.”
He was first elected to the Senate in 1962, taking the seat that his brother John had occupied before winning the White House, and he served longer than all but two senators in history.
Kennedy was diagnosed with a cancerous brain tumor in May 2008 and underwent surgery and a grueling regimen of radiation and chemotherapy.
He made a surprise return to the Capitol last summer to cast a decisive vote for the Democrats on Medicare. He made sure he was there again in January to see his former Senate colleague sworn in as president but suffered a seizure at a celebratory luncheon afterward.
His survivors include a daughter, Kara Kennedy Allen; two sons, Edward Jr. and Patrick, a congressman from Rhode Island, and two stepchildren, Caroline and Curran Raclin.
Edward Jr. lost a leg to bone cancer in 1973 at age 12. Kara had a cancerous tumor removed from her lung in 2003. In 1988, Patrick had a non-cancerous tumor pressing on his spine removed. He also has struggled with depression and addiction and recently spent time at an addiction treatment center.
___
Woodward reported from Washington. Associated Press writer Laurie Kellman in Washington, Philip Elliott in Oak Bluffs, Mass., and Bob Salsberg contributed to this report.
NEW YORK (CNNMoney.com) — A key measure of consumer confidence jumped much more than predicted in August, as the job market outlook and business expectations improved, said a report released Tuesday.
The Conference Board, a New York-based business research group, said Tuesday that its Consumer Confidence Index rose to 54.1 in August from an upwardly-revised 47.4 in July.
Economists were expecting the index to increase to 48, according to a Briefing.com consensus survey. The measure is closely watched because consumer spending makes up two-thirds of the nation’s economic activity.
The index posted declines in June and July, but the reading “appears to be back on the mend,” said Lynn Franco, a director at The Conference Board, in a prepared statement.
“Consumers were more upbeat in their short-term outlook for both the economy and the job market in August,” Franco added. But the reading for income expectations rose only slightly.
Despite August’s increase, the index remains at historically low levels. An overall reading above 90 indicates the economy is solid, and 100 or above signals strong growth.
The report is based on a survey mailed to a representative sample of 5,000 U.S. households. The questionnaire asks whether respondents think current business conditions are good, bad or normal, about employment conditions, as well as if they expect employment or income levels to improve or deteriorate over the next six months.
Job market outlook. The percentage of respondents expecting more jobs in the next six months rose to 18.4% from 15.5%.
Similarly, those saying jobs are “hard to get” slipped to 45.1% from 48.5% in August, while responses that jobs are “plentiful” ticked up to 4.2% from 3.7%.
Earlier this month the Labor Department reported that 247,000 jobs were lost in July and the unemployment rate fell to 9.4% from 9.5% in June — the first decline in more than a year.
According to government figures, 237,000 fewer people were unemployed last month. That decline could be due to discouraged job seekers who have stopped looking, people who have now retired, or those have gone back to school. But the rate does include people who have exhausted their unemployment benefits or do not collect them.
Income expectations. Consumers were only slightly more positive in their income expectations, Franco noted. Those expecting an increase in their incomes jumped to 10.6% from 10.1%.
“As long as earnings continue to weigh heavily on consumers’ minds, spending is likely to remain constrained,” Franco said.
Business conditions. Consumers anticipating business conditions to improve over the next six months increased to 22.4% from 18.4% in July, the report said.
Conversely, respondents expecting conditions to worsen in the months ahead slipped to 15.8% from 19%.
Final weekend of clunkers program draws big crowds
EMILY FREDRIX / AP Business Writer
From Vermont to California, exhausted but appreciative car dealers watched their lots grow empty as crowds rushed to trade in gas guzzlers during the final weekend of the popular Cash for Clunkers program.
The hectic pace of the $3 billion rebate program accelerated in the final weekend, after the government announced the program would end at 8 p.m. EDT Monday, two weeks earlier than expected.
Adding to the urgency, some dealers had said they would stop Cash for Clunkers sales even earlier to make sure the government reimbursed them for the rebates — or because they didn’t have enough eligible cars left.
In the final hours, customers streamed in.
“We thought about it a couple weeks ago,” said Annette Palmer, 51, at Town and Country Honda in Berlin, Vt., on Saturday with her husband. They hoped to trade in a 1999 Jeep Grand Cherokee for a Honda CR-V.
“We kind of dragged our feet. Then we heard it was closing and we picked up our feet and ran,” she said.
Though short of some new models, such as the Ford Focus, Honda Civic, Toyota Corolla and Nissan Altima, many dealers were still selling as many cars as they could before Monday night’s deadline.
Standing outside one of his Hyundai dealerships in Appleton, Wis., John Bergstrom said customers traded in 100 clunkers throughout his fleet of 20 dealerships on Saturday and 100 the day before. They were his two biggest sales days during the clunkers program.
“That’s about as good as it gets,” Bergstrom said. “It’s going out with a bang.”
In all, Bergstrom said his dealerships — whose brands include Ford, GM and Toyota — sold 800 cars during the program, boosting sales 30 percent. He had to bring in extra staff to deal with the paperwork, but the sales were worth the hassle, Bergstrom said.
At Universal City Nissan in Los Angeles, Alberto Vasquez said keeping up with the pace of the program has taken a toll on employees. Some labored past midnight to wrap up last-minute deals.
“Are we tired? Definitely,” said Vasquez, the dealership’s director of training. “But it’s also bittersweet, because we’re happy that we’re selling cars.”
The dealership has sold more than 700 vehicles through the program and brought in extra staff to help enter information on the government’s reimbursement Web site.
Cash for Clunkers has been wildly successful in spurring new-car sales and getting gas-guzzling models off the road, though some energy experts have said the pollution reduction is too small to be cost-effective. Customers receive rebates of between $3,500 and $4,500, depending on the improvement in fuel efficiency from their old vehicle to their new one. As of early Friday, nearly half a million cars had been sold through the program.
But the new sales left many dealers worried about not being reimbursed by the government. As of Friday, dealers had been reimbursed for just a small fraction of the billions in sales.
Some dealers chose to stop participating over the weekend so they could have enough time to process and file the paperwork, including AutoNation Inc., the nation’s largest auto dealership chain.
At Toyota Direct in Columbus, Ohio, employees were told to double- and triple-check paperwork so it wouldn’t be rejected for reimbursement, said Jim Collins, the dealership’s assistant general manager.
Sales picked up on Saturday, though the dealership had only 20 new cars eligible for sale under the program. Sales employees sometimes jogged paperwork into the manager’s office to keep up with the pace.
The dealership won’t take any new sales on Monday so it can be assured of reimbursements, Collins said.
“We have quite a bit of paperwork, but is it worth the selling of a car right now? Absolutely,” he said. “We like to sell cars. That’s what we’re in business to do.”
Martin Main Line Honda in the Philadelphia suburb of Ardmore stopped its Cash for Clunkers sales at noon on Saturday. But by late afternoon there were still groups of people wandering the lot.
General sales manager Michael Freeman said the program had been “overwhelming,” with 115 clunker sales and big surges in customer traffic at the start and now at the end. He’s aiming to get the final stack of paperwork filed before Monday’s deadline.
“I have people upstairs, that’s all they’re doing — paperwork,” he said. “The backlog is a nightmare, and it’s starting to be a nightmare at the end.”
Customers were feeling the urgency, too.
In Appleton, Wis., April DeKeyser looked at her new Mazda 3 2010 and still had trouble accepting that it was hers.
The 22-year-old nurse from Brussels, Wis., had wanted to trade in her Chevy S10 truck as soon as the clunkers program began. But she had a hard time finding the car she wanted and had to run to numerous dealers.
DeKeyser said she knew she had to get the rebate this weekend. Without it, she wouldn’t have bought her new car.
“I would have waited,” she said. “Basically, I would have driven the other vehicle until it died.”
——
Associated Press writers Alex Veiga in Los Angeles, Andrew Welsh-Huggins in Columbus, Ohio, Ron Todt in Philadelphia and David Gram in Berlin, Vt., contributed to this report.
THE MBTA, Turnpike Authority, and other parts of a sprawling transportation bureaucracy are about to be consolidated into a single agency. One job for this new authority must be to rethink which mega-projects the state should pursue aggressively. Some projects, including the long-discussed $8 billion tunnel linking North and South stations, won’t survive such closer scrutiny.
For years, Massachusetts has been blessed with leaders who understand the vital importance of public transportation, so planners are in the habit of thinking big, rather than saying no. But the need for restraint is apparent. Federal transportation officials rejected a long list of proposed transit and highway projects in 2007 in part because it lacked any fiscal modesty. While the state slashes health programs amid plunging revenues, it expects to spend $29 million to design a connection downtown between the Red Line and the Blue Line – never mind that the money to build the $300 million project won’t come through anytime soon.
Local drawing boards are replete with potentially worthy conceptions, a few of which have been lingering on the vine for so long that John Volpe and Frank Sargent probably discussed them during the Nixon administration. The more recently proposed Urban Ring, a bus-rapid-transit circuit through Boston’s outer neighborhoods and inner suburbs, would involve a $1.7 billion tunnel at the Longwood Medical Area. A $1.5 billion tunnel connecting the two parts of the Silver Line would give Roxbury and South End residents “one-seat’’ access to Logan Airport and the new business district emerging on the South Boston Waterfront.
And that’s just the tunnels. Other projects once listed as high priorities for the region include expansion of the Green Line to Medford, the Blue Line to Lynn, and the commuter rail system to Fall River and New Bedford.
This page has supported virtually all of these projects. But maybe, just maybe, some of them won’t be built anytime soon – or ever. As debts associated with the $14-billion-plus Big Dig hobble transportation agencies in Massachusetts, the prospect of building four more tunnels under Boston is a distant fantasy.
A lack of vision?
To Fred Salvucci – the visionary who planned the Big Dig and a strong supporter of public transportation – giving up on some projects looks like defeatism. There’s no telling where money and political support will end up, he says. When he served as transportation secretary under Michael Dukakis, he was convinced that the Blue Line would reach Lynn long before the Red Line, which at the time ended at Harvard, would be extended to Alewife. Events proved otherwise. So Salvucci argues for identifying an array of desirable projects and then pushing hard for all of them. The state has to be willing to do design work on a variety of projects, he says, because having well-developed plans is crucial to getting federal funds.
Yet nearly all major projects require substantial local matching funds. And to many current officials, the fiscal requirements look quite daunting. The Legislature just committed $275 million in new revenues to transportation, but for operations, not capital improvements, notes Marc Draisen, head of the Metropolitan Area Planning Council. The state, he says, must not “keep telling every advocate, ‘Keep designing, we’ll get to you eventually.’ ’’ Making too many promises can be expensive: Design work generally eats up 7 to 10 percent of a project’s budget.
Progress toward pragmatism
Some signs of progress toward creating a more realistic, actionable set of priorities is evident. Transportation Secretary James Aloisi has called for funding all of a few projects rather than parts of many. A state-led planning group is about to release a slimmed-down regional transportation plan for Greater Boston. The list of transit projects is limited to the Green Line expansion to College Avenue in Medford, a new Orange Line station in Somerville, new commuter rail parking spaces, and design of the Red Line-Blue Line connector – all of which the state agreed to complete in a Big Dig-related legal settlement with the Conservation Law Foundation. Before a new regional plan is due two years from now, the planning group and the new transportation agency should make a more detailed review of big-ticket projects.
A Green Line expansion would top a sensible list of major improvements, not least because it extends rapid transit through underserved but densely populated areas of Somerville and Medford. And a version of the Urban Ring would complement the current transit system, which consists mainly of spokes radiating from downtown – but that project must be scrutinized more closely for affordability.
In evaluating a project, state planners consider how many car trips it might prevent, what effect it might have on land use, and how its benefits measure up against its costs. We would add other criteria: Are there cheaper ways to achieve the same transportation and environmental goals? Can objections from community residents be addressed?
Focusing on a long list of big-ticket transit projects only makes it harder to zero in on the most important ones and then muster the financial, political, and technical expertise necessary to make them happen.
It’s admirable to dream, but the immediate post-Big Dig era of Massachusetts transportation will be one of practicality over promises.
About 10 years ago, when I was working in Frankfurt, Germany’s banking capital, I was invited to the top floor of the glittering skyscraper headquarters of one of the country’s most venerable banks. There, I was treated to something that, it was made clear to me, few eyes usually had the privilege of seeing — a tour of its private art collection, an impressive spattering of modern and ancient European and American masters.
The point was, those pictures reflected the bank’s wealth. And the fact the secretive treasures were kept forever behind closed doors for the enjoyment of the privileged few reflected its power.
If that seems like a different era, it is. Banks around the world are reeling, as we know; the European banks’ losses are among the most ruinous. And their prestige and putative secrecy and independence received a further blow last week, when the government of Switzerland agreed to release to the United States the names of 4,450 American citizens suspected of using secret Swiss accounts at UBS, the country’s biggest bank, for tax evasion.
The victory for the United States was made possible by evidence from an American-born whistleblower — code name Tarantula — a disgruntled former UBS employee from the Boston area who was working in Switzerland. Until he left the bank, he was part of a UBS team that made frequent trips across the Atlantic to aggressively market investment strategies to rich Americans to elude the scrutiny of the Internal Revenue Service.
But it would be wrong to see the settlement as a one-off strike against just one bank by a single government. It is in fact the result of a broader political moment created in the wake of the global financial crisis when disenchantment with financial globalization is causing governments to repatriate wealth back to within national borders, especially at a time when countries badly need to balance their books.
Just a few years ago, in the pre-crisis era, the shadowy workings of cross-border banking — and what may or may not have been happening there — were generally overlooked.
And, while some of the alleged tax evaders may be the war criminals, gunrunners or despots usually linked with secret foreign bank accounts, the target of the latest efforts are much more likely to include rich businessmen and high-net-worth individuals. “There is a political movement because of the financial debacle,” said one veteran European banker who insisted on speaking anonymously because he has retired. “They are turning toward the so-called rich and want to hurt them.”
Of course, the United States looks at it a bit differently. Prosecutors have contended that in the UBS case alone, wealthy Americans hid billions of dollars, thereby evading taxes of hundreds of millions of dollars a year.
While Switzerland is arguably the largest off-shore center, it is not the only one. Supporters of its banking secrecy code point out that the code is wrapped up in the country’s claims to neutrality and being above the global political fray. But secrecy has also turned out to be immensely lucrative; according to some estimates one-quarter of the world’s offshore money now resides in Switzerland.
Other countries or territories have copied the model — Liechtenstein, Bermuda, the Cayman Islands, Macao and Hong Kong among them. And while Switzerland is probably seen as the most conservative, blue chip, upstanding offshore haven, the others are measured by a sliding scale of probity and association with dubious business practices, if not crime. The European banker said that in the early 1990s, following the fall of the Soviet Union, he worked in Switzerland where he said agents of Russian expats would show up with “boxes of cash” from Cyprus, a popular haven for capital fleeing the Russian authorities and the country’s post-collapse chaos.
The backlash against this illicit world has not been confined to the United States; it is apparent across Europe, too.
France will become of one of the first European countries to put in place a new tax treaty with Switzerland to improve transparency and access to banking information. Germany is in discussions with Liechtenstein over issues related to tax evasion by German companies and individuals. Liechtenstein has also struck a disclosure agreement with Britain, encouraging British clients of Liechtenstein banks to volunteer information to British tax authorities in return for reduced penalties. In Italy, tax officials have started an investigation into whether the estate of the late Gianni Agnelli, the former chairman of Fiat, has money hidden away in Switzerland. In Britain, the government has become particularly exercised by tax competition — the offering of low tax rates and other advantages like tax secrecy to lure capital away.
In the Swiss settlement last week, the American authorities got the information they needed after they saw an opportunity in the weakness of UBS, a bank that once enjoyed a sterling global reputation but has suffered billions of dollars in losses linked to United States subprime securities and had to be saved by a big government bailout last October. For the Swiss government, the deal lifts the immediate threat of heftier legal action and frees the bank — one of the mainstays of the Swiss economy — to concentrate on recovery.
But will anything really change? Although the United States is supposed to learn the identities of a few thousand tax evaders, those names will go first to an intermediate tax administration in Switzerland for review. The actual process of recovering the names may become lost in bureaucracy and foot-dragging.
Moreover, as The Times reported last week, smaller Swiss banks say they are confident that they can continue to profit by finding new, more elaborate ways to protect the privacy of their clients. Those banks continue to help clients hide billions of dollars through complex structures in offshore havens.
But the I.R.S. commissioner, Doug Schulman, said the agreement with UBS was a “major step forward” in the government’s efforts to pierce bank secrecy, and he warned that “wealthy Americans who have hidden their money offshore will find themselves in a jam.”
In the new political climate, expect to see a few rich Americans shifting uncomfortably.
(CNN) — Facebook, for better or worse, is like being at a big party with all your friends, family, acquaintances and co-workers.
There are lots of fun, interesting people you’re happy to talk to when they stroll up. Then there are the other people, the ones who make you cringe when you see them coming. This article is about those people.
Sure, Facebook can be a great tool for keeping up with folks who are important to you. Take the status update, the 160-character message that users post in response to the question, “What’s on your mind?” An artful, witty or newsy status update is a pleasure — a real-time, tiny window into a friend’s life.
But far more posts read like navel-gazing diary entries, or worse, spam. A recent study categorized 40 percent of Twitter tweets as “pointless babble,” and it wouldn’t be surprising if updates on Facebook, still a fast-growing social network, break down in a similar way. Take a CNN quiz: What kind of Facebooker are you? »
Combine dull status updates with shameless self-promoters, “friend-padders” and that friend of a friend who sends you quizzes every day, and Facebook becomes a daily reminder of why some people can get on your nerves. Watch as Facebookers reveal bugbears »
Here are 12 of the most annoying types of Facebook users:
The Let-Me-Tell-You-Every-Detail-of-My-Day Bore. “I’m waking up.” “I had Wheaties for breakfast.” “I’m bored at work.” “I’m stuck in traffic.” You’re kidding! How fascinating! No moment is too mundane for some people to broadcast unsolicited to the world. Just because you have 432 Facebook friends doesn’t mean we all want to know when you’re waiting for the bus.
The Self-Promoter. OK, so we’ve probably all posted at least once about some achievement. And sure, maybe your friends really do want to read the fascinating article you wrote about beet farming. But when almost EVERY update is a link to your blog, your poetry reading, your 10k results or your art show, you sound like a bragger or a self-centered careerist.
The Friend-Padder. The average Facebook user has 120 friends on the site. Schmoozers and social butterflies — you know, the ones who make lifelong pals on the subway — might reasonably have 300 or 400. But 1,000 “friends?” Unless you’re George Clooney or just won the lottery, no one has that many. That’s just showing off.
The Town Crier. “Michael Jackson is dead!!!” You heard it from me first! Me, and the 213,000 other people who all saw it on TMZ. These Matt Drudge wannabes are the reason many of us learn of breaking news not from TV or news sites but from online social networks. In their rush to trumpet the news, these people also spread rumors, half-truths and innuendo. No, Jeff Goldblum did not plunge to his death from a New Zealand cliff.
The TMIer. “Brad is heading to Walgreens to buy something for these pesky hemorrhoids.” Boundaries of privacy and decorum don’t seem to exist for these too-much-information updaters, who unabashedly offer up details about their sex lives, marital troubles and bodily functions. Thanks for sharing.
The Bad Grammarian. “So sad about Fara Fauset but Im so gladd its friday yippe”. Yes, I know the punctuation rules are different in the digital world. And, no, no one likes a spelling-Nazi schoolmarm. But you sound like a moron.
The Sympathy-Baiter. “Barbara is feeling sad today.” “Man, am I glad that’s over.” “Jim could really use some good news about now.” Like anglers hunting for fish, these sad sacks cast out their hooks — baited with vague tales of woe — in the hopes of landing concerned responses. Genuine bad news is one thing, but these manipulative posts are just pleas for attention.
The Lurker. The Peeping Toms of Facebook, these voyeurs are too cautious, or maybe too lazy, to update their status or write on your wall. But once in a while, you’ll be talking to them and they’ll mention something you posted, so you know they’re on your page, hiding in the shadows. It’s just a little creepy.
The Crank. These curmudgeons, like the trolls who spew hate in blog comments, never met something they couldn’t complain about. “Carl isn’t really that impressed with idiots who don’t realize how idiotic they are.” [Actual status update.] Keep spreading the love.
The Paparazzo. Ever visit your Facebook page and discover that someone’s posted a photo of you from last weekend’s party — a photo you didn’t authorize and haven’t even seen? You’d really rather not have to explain to your mom why you were leering like a drunken hyena and French-kissing a bottle of Jagermeister.
The Maddening Obscurist. “If not now then when?” “You’ll see…” “Grist for the mill.” “John is, small world.” “Dave thought he was immune, but no. No, he is not.” [Actual status updates, all.] Sorry, but you’re not being mysterious — just nonsensical.
The Chronic Inviter. “Support my cause. Sign my petition. Play Mafia Wars with me. Which ‘Star Trek’ character are you? Here are the ‘Top 5 cars I have personally owned.’ Here are ’25 Things About Me.’ Here’s a drink. What drink are you? We’re related! I took the ‘What President Are You?’ quiz and found out I’m Millard Fillmore! What president are you?”
You probably mean well, but stop. Just stop. I don’t care what president I am — can’t we simply be friends? Now excuse me while I go post the link to this story on my Facebook page.
One of television’s hottest shows is AMC’s “Mad Men,” featuring ad executives who work (and imbibe) on Madison Avenue during the 1960s, an era many would argue was the heyday of advertising.
It was a period when TV commercials ruled over all other advertising mediums. Consumers were more than likely to see those Utz potato chip spots (an account that Mad Men’s fictitious agency, Sterling Cooper, handles) because they only had three channels to watch.
Not that we needed any more evidence that those days are gone, but research firm Yankee Group reported this week that the U.S. ad market will decline by more than $1.6 billion in 2009.
The steep drop-off is due to an oversupply of media, which Boston-based Yankee Group details as an average of 119 TV channels to choose from. Those programmers are competing with a “trillion internet links and more than a million mobile Web sites,” according to the company.
That oversupply is also driving a $2 billion decline in TV advertising alone this year, per the Yankee Group.
The company notes that “the market power of television is being eroded by dramatic growth in IP networks and their corresponding capacity to carry advertising.”
Indeed, the company forecasts there will be more than 477 million wired broadband users by the end of 2009, a jump of more than 50 million since 2008.
Ironically “Mad Men” itself is a victim of increasingly fragmented TV audiences. The show’s season 3 premiere on Sunday drew a record live audience of 2.8 million viewers. And although that number is a 33 percent increase over last year’s season premiere, it’s still a viewership that’s less than half of other original cable series. For example, TNT’s “The Closer” averages about 7 million viewers per episode, according to Forbes.com.
Even Utz potato chips, a popular snack brand during the 1960s that still exists today, relies on clever product placements in “Mad Men” rather paying for pricey TV campaigns.
For veteran ad men nostalgic about the good old days when it was easier to get the attention of consumers and cocktails were thrown back at the office to celebrate a new business win, there’s always “Mad Men.”
BOSTON — When it comes to investing, most retired Americans have it backwards. Instead of investing in bonds — things that provide a return on capital, those seeking retirement-income security tend to invest in things that provide a guaranteed return of capital. Doing so could lower one’s standard of living, especially when short-term interest rates fall.
“Retired households seeking a secure and dependable income should prioritize return on capital over return of capital,” wrote Anthony Webb, author of a report released this week by the Center for Retirement Research at Boston College.
“Households need to make a conscious effort to learn to focus less on the market value of their investments and more on the consumption they can support,” he said.
To Webb’s way of thinking, “the true risk-free asset is a portfolio of bonds and, in particular, inflation-protected bonds of appropriate maturities.” In other words, Treasury Inflation Protected Securities or TIPS. Read his report.
That’s not what most investors are doing now. Most retired Americans prefer investments such as Certificates of Deposit and T-bills — investments that provide safety and liquidity. For instance, 86% of households nearing retirement have bank accounts, while just 33% own stocks directly and just 7% own bonds directly, according to another CRR study. Read that study (PDF).
Yes, short-term deposits do provide a guaranteed return of capital, but they don’t offer guaranteed returns, Webb said. And that’s what most retired households need.
“The ultimate objective of retirement saving is to finance consumption,” Webb wrote. “The standard of living of a household that invests in short-term deposits is at risk if short-term interest rates fall. In contrast, changes in interest rates and bond prices may have no effect on the standard of living of a household investing in bonds.”
Given that, how might you re-jigger your portfolio?
Ladder your bonds
In a perfect world, if you knew in advance how much of your capital you planned to consume or spend in the future, you would put together a bond portfolio with income payments that matched your consumption needs. In other words, you would ladder your portfolio. And you would match your asset (the bond) with your liability (your expenses.)
For his part, Michael Zwecher, author of a forthcoming book on retirement, said another way to achieve the nearly same result is to ladder Treasury STRIPS or what are sometimes called zero-coupon securities. These are securities that pay a fixed rate of return and are stripped down to single payment components, he said. As single payments, they sell at a discount and rise over their life to pay par on maturity.
“They can be set up in a ladder to provide steady or customized income streams,” he said. Plus, STRIPS are highly safe and liquid. What’s more, STRIPS are standardized and mature on either Feb. 15 or Aug. 15 each year. Currently they can be bought to cover maturities ranging from 2010 to 2039, he said. Learn more about Treasury STRIPS at this site.
Meanwhile, Aaron Skloff, chief executive officer of Skloff Financial Group said that corporate bonds currently provide “excellent risk/reward” for retirees. “Fears of mass defaults have waned, as the ‘definite’ collapse of the global financial system has once again become a remote probability.” He said investors concerned about buying a “bad” bond should consider a basket through an ETF or bond fund.
Duration matching
Unfortunately, laddering a bond portfolio “probably requires more knowledge and patience than most households possess,” Webb said. Instead, you might try what he calls the simple version of this strategy. “Invest in a mutual fund or exchange-traded fund investing in bonds with an average duration that equals the household’s life expectancy,” he said.
“Early in retirement, the household would invest mostly in long-dated bonds. Later in retirement, it would gradually rebalance its remaining assets in favor of shorter maturity bonds, matching the reduction in its remaining life expectancy,” Webb said.
Optimize your asset allocation
To be sure, you wouldn’t invest 100% of your retirement nest egg in bonds. Instead, Webb suggests that to optimize the amount you invest between stocks and bonds. And to do that you need to consider your entire retirement-income portfolio. For instance, he said Social Security is similar to owning TIPS. And having a defined-benefit pension plan is similar to owning regular or what he calls nominal bonds.
“Those sources of income are good substitutes for inflation-protected and nominal bonds in household portfolios, and households with large amounts of these sources of income should invest larger proportions of their financial assets in equities than otherwise similar households,” he said.
Others also urged investors not to over-invest in bonds just because they provide a guaranteed rate of return. Don’t confuse certainty with safety, said Harold Evensky, the president of Evensky & Katz. “The payment on bonds, assuming no default, may be certain but for most investors a total allocation to bonds is certainly not safe,” he said.
“The problem is that most investors require a real after-tax return that significantly exceeds the return provided by fixed-income investments. As a result, an over-concentration in bonds will result in a gradually decreasing living standard.”
What’s more, Evensky said it’s important to consider all the risks that come with investing in bonds, including interest-rate risk, credit risk, and inflation risk, before you start moving money out of CDs and T-bills.
“Unless the [Center for Retirement Research] is in the business of pumping bond sales, I think that it would do well to frame the results of its study with the reality of risks other than market volatility.” he said.
NEW YORK — The cool kids of the airline industry are giving big-city travelers more opportunities to show who they like more.
For years, JetBlue and Southwest catered to customers in the same way — with cheap fares and good customer service — but avoided much head-to-head competition in major markets. These days, they are trying to distinguish themselves as they ramp-up competition in places like New York, Washington, Baltimore — and starting this weekend, Boston.
Fliers stand to benefit as these airlines expand in the Northeast. This rivalry not only pits one popular low-cost carrier against another; it puts further pressure on other airlines to stay competitive with them.
It also means JetBlue and Southwest must find ways to differentiate themselves. Southwest is touting its fewer baggage fees and more extensive nationwide presence, while JetBlue is highlighting its live TV service and its own comprehensive route system.
Just over a month after Southwest began flying out of New York’s LaGuardia — eight miles from JetBlue’s base at John F. Kennedy International — Southwest begins service on Sunday from Boston’s Logan International Airport. In September, Southwest starts service between Boston and Baltimore.
A few years back, their flights mostly crossed paths in places like Burbank, Calif., and Orlando, Fla.
The move to New York was a game-changer for Southwest. Formerly it concentrated on smaller, less-congested airports, where it could count on quick turnarounds, a key to its low-cost model.
And with Southwest breathing down its neck, JetBlue has had to make a more aggressive defense of its traditional turf, cutting fares and mulling new routes.
Expect to see low fares discounted further on routes where Southwest and JetBlue will compete out of Boston — especially to Northeastern markets, Chicago and Los Angeles.
When Southwest announced it would fly from Boston to Baltimore for as low as $49, JetBlue said a week later it would launch the same route — offering tickets for $10 less.
“It makes me think of gunfighters in the Old West — who is going to be the last man standing?” said Harlan Platt, a finance professor at Northeastern University who follows the airline industry.
Dallas-based Southwest is the biggest U.S. airline by the number passengers flown. JetBlue is tenth, but it’s No. 2 at Logan.
Much of JetBlue’s model of low fares and quick turnarounds came right out of Southwest’s playbook. It’s no wonder. JetBlue founder David Neeleman started JetBlue in 1999 after he was fired from Southwest.
In 1993, Southwest bought a little-known discount charter airline called Morris Air, based in Salt Lake City. Its co-founder — Neeleman — came to Southwest.
But that didn’t last long. Southwest founder Herb Kelleher — a cigarette-smoking, Wild Turkey-drinking Texas lawyer that revolutionized the airline industry in the 1970′s — fired Neeleman after just five months. Neeleman, a Brazilian-born Mormon father of nine who’s never touched booze, had new ideas for expanding Southwest that were scoffed at by long-time executives there.
JetBlue (originally NewAir) was started with $130 million from investors — the most ever for a startup carrier. Neeleman attracted several Southwest executives to the new airline as well. Three Southwest veterans are with JetBlue today. One worked with Neeleman since his days at Morris Air.
JetBlue started with a single flight to Fort Lauderdale, Fla. It now has 650 daily flights to 56 cities. Its rapid growth has now started to plateau, but JetBlue is still steadily adding new service in markets larger carriers have turned away from — like the Caribbean.
JetBlue has been in Boston for five years, although it’s only recently targeted the city as a focus of its expanding operations.
Southwest will start Boston service with five weekday nonstops to Chicago-Midway and Baltimore-Washington International, with connecting and direct service to 48 other spots including Houston, San Francisco, Las Vegas and Los Angeles.
Boston is familiar with Southwest because of its service in nearby Manchester, N.H., Providence, R.I., and Hartford, Conn. — three markets it has been serving for about a decade.
Both carriers’ low fares and brand loyalty should give them a leg up against major carriers in Boston. It’s already worked for JetBlue. The airline has worked its way up to second place at Logan in passenger traffic, behind American and ahead of US Airways, which operates a Boston-New York and Boston-Washington shuttle service.
“When you enter a town the size of Boston as really the sole low-cost carrier (like JetBlue did), you really can pick off a lot of the legacy carriers,” finance professor Platt said. “But when the last two gunfighters are JetBlue and Southwest, you’ve got another game.”
Platt thinks Southwest eventually will win the discount competition with JetBlue in Boston because of its large network and image as an anti-fee airline with ads that say “Your Bags Fly Free.” Southwest lets two bags fly free, but charges for a third checked bag. JetBlue charges for the second checked bag.
JetBlue wants more business travelers, as does Southwest, which has tried to lure them with its “Business Select” option launched two years ago. Passengers that pay a premium can go to the front of the boarding line. Neither airline offers business or first class seats.
JetBlue said in July that although it has not focused on courting business travelers in the past, it’s landing more of them in New York and Boston as companies cut travel budgets.
Because of their cheap fares and high customer service rankings, both airlines have legions of loyal travelers. Part of that loyalty can also be traced to fresh marketing that tries to put some fun in flying. JetBlue’s tongue-in-cheek ads have urged executives to get off their private jets and fly JetBlue. In Southwest TV ads, CEO Gary Kelly told customers “It’s On” in New York.
Both airlines are on YouTube. Blogs and Twitter are also important parts of their brands.
Kelleher and Neeleman no longer run the airlines they started. Kelleher, 78, stepped down as chairman last year, but he is still under contract until 2013. Neeleman, 49, runs Azul Airlines in Brazil — a venture he started after he was pushed out of JetBlue in 2007 following the company’s bungled response to a Northeast snowstorm, leaving 130,000 passengers stranded or delayed.
But the airlines they started still have the low-cost, passenger-savvy traits of their founders. Both have flown farther and lasted longer than some of their larger competitors. Platt thinks the big airlines may have something to worry about now in Boston — and JetBlue will have to ramp up its game, too.
“Boston has really been a two-horse town with (two major carriers dominating service there),” he said. “Just the mere presence (of another low-cost carrier) is going to change the landscape.”
Visit the Cleantech Boston Website: CLICK HERE and Learn More.
The first cleantech investment boom (2001-2008) was driven by rapid growth and experimentation. A second cleantech investment boom is being driven by a new emphasis on capital efficiency, and engaging governments—which, combined, are now the single largest investor in cleantech.
Leverage new government funding
Cleantech Forum® XXIII in Boston, September 8-10 at the Boston Convention and Exhibition Center, will have a strong focus on governmental programs given that worldwide governments have pledged billions of investment capital to clean technologies.
Themed The Second Cleantech Investment Boom: Aligning Entrepreneurship and Innovation with Government Stimulus, this year’s East Coast Cleantech Forum in Boston will assemble CEOs, investors, scientists, policy-makers and other industry pioneers to drive demand and open cleantech markets.
Explore latest developments in climate change and resource scarcity driving markets for clean technologies
Measure the current global economic climate and its relationship to cleantech
Gain access to capital and industry pioneers
Network and learn from cleantech pioneering innovators, corporates and investors
Connect with industry insiders
Keynote speaker: Matt C. Rogers, Senior Advisor for Recovery Act Implementation, U.S. Department of Energy
Rogers oversees the U.S. DOE’s disbursement of energy-related stimulus funding. He reports to U.S. Energy Secretary Steven Chu, and will offer insights at the Cleantech Forum into how the cleantech sector can best interface with the U.S. government to access billions in DOE funding. Rogers was formerly leader of McKinsey’s North American Petroleum Practice and was an advisor to the Obama presidential transition team. Previously, Rogers was Senior Partner in McKinsey & Company’s San Francisco office where he helped establish their clean technology practice.
Other speakers include:
Matt C. Rogers Senior Advisor for Recovery Act Implementation
U.S. Dept. of Energy
Joseph Stanislaw Senior Advisor, Energy & Resources
Deloitte
Tom Cain Managing Partner
SAIL Venture Partners
Neal Dikeman Partner
Jane Capital
Dennis Costello Managing Partner
Braemer Energy Ventures
Chuck McDermott General Partner
RockPort Capital
Hull McKinnon Principal
Altira Group
Leonard Schlesinger President
Babson College
Jonathan Rhone CEO
Nexterra Systems
Stanley Kowalski III Chairman
FloDesign
Kelly Warner CEO
Deerpath Energy
R.J. Lyman Partner
Goodwin Procter Investor
Jim Paull Founder
Stellaris
Mark Donohue Clean TechnologyEntrepreneur-In-Residence
Babson College
Scott Smith U.S. Clean Tech practice leader
Deloitte
Dan Goldman Executive Vice President
GreatPoint Energy
Tom Carbone CEO
Nordic Windpower
Mitch Tyson CEO
Advances Electron Beams
Tom Mennino Mayor
City of Boston
Terry Yosie President and CEO
World Environment Center
Pat Cloney Head of Bus. Dev.
Mass. Gov.’s office
Marianne Wu CEO
Mohr Davidow Ventures
Michael Meehan CEO
Carbonetworks
Jamie Kiggen Senior Managing Director
Blackstone
David Marcus CEO
General Compression
Vicky Sharpe, Ph. D. President and CEO
Sustainable Development Technology Canada
Scott Voss Principal
HarbourVest Partners, LLC
Andy Hirsch Partner
Wilson, Sonsini, Goodrich & Rosati
Jim Gordon President
Energy Management Inc
John Danner CEO
Northern Power
Christina Lampe-Onnerud CEO
Boston Power
John Mizroch Counsel
Wilson, Sonsini, Goodrich & Rosati
The three day Cleantech Forum XXIII Boston features:
Discussions on the challenges cleantech entrepreneurs and innovators face navigating government loan guarantee programs
Stimulus and Policy Workshop
Developments in the emerging markets of India and China
Opportunities to interact with CEOs of professional investor-selected cleantech growth companies looking for advice, capital, partners, customers and talent – a hallmark of Cleantech Forums
An Entrepreneurial MasterClass clinic
Presentation of a new Cleantech Product Innovation award, and
Multiple tracks, with sessions exploring latest developments in carbon, industrial energy efficiency, biomass, CPV, infrastructure opportunities and challenges, next generation wind, waste to energy, energy storage and more
Who should attend Cleantech Forum XXIII?
Investors:
Limited partners & investment banks
Venture capitalists, angels, corporate and institutional investors
Hedge fund and private equity managers
Project financiers and asset managers
Industry leaders and influencers:
Corporate energy and sustainability executives
Cleantech entrepreneurs
Utility and industry executives
Professional service providers such as lawyers, accountants and consultants
Governments, economic development councils, policy makers, scientists and researchers
Seven years of global market leadership
Cleantech Forum XXIII Boston is one of the Cleantech Group’s five premier events each year across North America, Europe, China and India. The Forums provide insight, investment opportunities and unparalleled networking for the world’s leading investors, growth companies and global corporations.
Join us in Boston, site of the American revolutionary tea party, as the industry forges the nextclean technology revolution.
STATE HOUSE, BOSTON, AUG. 13, 2009…..The state, local governments and private entities in Massachusetts have received $4.44 billion and spent more than $2.02 billion, 45 percent, through the federal stimulus law, known as the American Recovery and Reinvestment Act.
That percentage of spending puts Massachusetts seventh among states in the rate of putting stimulus funds into the economy, Executive Office of Administration and Finance officials said Thursday. By the end of the life of the stimulus in fiscal 2011, the state expects to receive $9.22 billion for spending out of $514 billion doled out nationally, as well as $4.28 billion in tax benefits, compared to $272.52 billion nationally.
Testifying Thursday before the Legislature’s Committee on Federal Stimulus Oversight, budget officials said the federal funds had helped save budgets for important social welfare programs, spark infrastructure development and retain jobs. But “evolving” federal guidance has made it difficult to track the number of jobs created, they said.
Much of the funding has been used in the state budget, effectively preserving jobs that may have been cut.
Secretary of Administration and Finance Leslie Kirwan said stimulus spending was one facet of the Patrick administration’s effort to turn around the Massachusetts economy, which has seen tens of thousands of job losses and deteriorating tax collections in recent months. Other aspects include the state’s borrowing program, an accelerated bridge repair program, as well as investments in broadband, clean energy and life sciences.
Of the $2.02 billion in stimulus funds spent, state agencies are responsible for $1.47 billion, including $419 million for education, $1.02 billion for safety net programs, $12.4 million for public safety efforts, $8.1 million for labor and workforce development programs and $4.5 million for transportation programs. The rest flows directly into cities and towns, school districts and non-governmental entities.
Spending deadlines for hundreds of millions of dollars of transportation infrastructure funds have been met and exceeded, said Jeffrey Simon, director of the Patrick administration’s Office of Infrastructure Investment, which oversees much of the stimulus spending. Those deadlines included a 120-day window to spend $153 million on highway repairs – Massachusetts spent $191 million – and a 180-day timeframe to spend $159 million on transit – the state has spent $164 million as of two weeks ago – Simon said. If those deadlines had not been met, the state would have had to return the money to the federal government.
Administration officials said they were struggling to quantify the number of jobs created by ARRA funds because of “evolving” guidance for how to calculate job gains and job retention.
“We’re on version three now of directives from [the federal Office of Management and Budget],” Simon said. Simon pointed to an October 10 deadline for reporting such numbers, when the state hopes to have clearer guidance.
Sen. Marc Pacheco, who co-chairs the stimulus oversight committee, said he expected “a good news story” when those job numbers were available.
Kirwan later said she expected the numbers to show that “most likely thousands of local jobs” had been created or retained. She, as well as committee co-chair Rep. David Linsky, said the federal funds for safety net programs – food stamps, mental health services and others – had saved lives.
Since March 19, the last time Administration and Finance officials came before the committee to discuss stimulus funding, Simon’s office has hired two veterans of Attorney General Martha Coakley’s office to help oversee infrastructure spending. The two, Stephanie LeBlanc and Douglas Rice, who respectively serve as infrastructure assessment manager and compliance and reporting manager, worked on Big Dig cost recovery efforts for Coakley. Simon said hiring officials with that experience made “a statement” about the administration’s seriousness about ensuring that public dollars are spent wisely.
Kirwan told committee members the administration had hoped to evenly spread its stimulus funds through fiscal years 2009, 2010 and 2011, but steep deterioration in revenue collections moved state policymakers to frontload much of the stimulus spending to help balance the fiscal 2009 budget.
“When the governor first put this budget together for fiscal ’10, we had not yet experienced the revenue losses for April and June,” she said, noting that those two months saw revenues miss benchmarks by $500 million and $180 million, respectively. “At this time last year, we still had not lost a dollar of revenue. We did not until the middle of September last year have any loss of revenue.”
Comptroller Martin Benison also testified at the hearing, describing his office’s efforts to track and report on 34 separate grant awards overseen by OMB. Twenty departments – 16 executive agencies, two non-executive departments and two colleges – are responsible for administering those grants, which have totaled more than $500 million to date. Much of that includes a $412 million use of education funds to offset a fiscal 2009 local aid reduction.
Benison said his office holds weekly conference calls with stimulus stakeholders to coordinate reporting efforts.
The Chevrolet Camaro claimed the No. 1 spot on AutoTrader.com’s most viewed new vehicles list for the third month in a row, topping off what has become one of the first positive months for new car sales in over a year.
Cash-for-Clunkers brought consumers on-line and into showrooms in July to look for cars, reflected in AutoTrader.com site traffic of 15.3 million unique visitors to the site during the month of July. July marked the seventh month in a row that AutoTrader.com has seen its unique monthly visitor count top 15 million, the company said.”We have been waiting for the pent-up demand for new vehicles to uncork all year, and Cash-for-Clunkers has provided the jolt the industry needed,” said AutoTrader.com President and CEO Chip Perry. “Consumers have been turning primarily to the Internet to research information about cars and prices, and that research is finally being put into action as these shoppers turn into buyers at dealerships across the country.”
Among new vehicles, the all-new Chevrolet Equinox saw an impressive 197% increase in views, moving it from 99th to 18th year-over-year. Similarly, the recently redesigned Ford Fusion saw an increase in views of 28%, enough to move the midsize sedan from 35th to 16th overall. Ford also saw an increase in asking prices for the new Fusion of 12%, with the average price of vehicles listed on AutoTrader.com being $24,798. This compares well the Fusion’s chief competitors, the Honda Accord and Toyota Camry, which had average listing prices of $25,217 and $24,487, respectively.
Continuing to look at Ford vehicles, the new F-250 full-size pick-up, which saw a severe drop in sales last July due to record-high $4 per gallon gas, also saw a significant year-over-year increase in consumer activity, with views increasing 87%. Finally, Kia saw one of the largest increases in views among brands as a whole, as consumer activity around vehicles such as the newly-introduced Soul crossover and the new Forte compact sedan helped move the brand to its first-ever appearance on the top 10 Most Viewed Manufacturers list.
“With demand for many cars high now, supplies of vehicles at many dealerships have run short,” said Perry. “For consumers looking to now take advantage of the CARS legislation by purchasing a popular model such as one of these, turning to AutoTrader.com to locate a dealer with the exact new vehicle of their choice is certainly the smart way to go.”
Used & CPO Car Activity
Among used and CPO vehicles, the Ford F-150 saw a 31% gain to become the most viewed used vehicle, while the BMW 3-series once again topped the list of most viewed among CPO vehicles. More notably, prices for used vehicles across a variety of segments rose, with trucks seeing the largest jumps from last year’s lows. The biggest gainer was the Chevrolet Tahoe, which saw an increase in average asking price of 20% compared to July of 2008.
“Excepting last summer’s unusual selling situation brought about by record high gas prices, the consumer demand for larger vehicles such as SUVs has generally continued unabated,” said Perry. “Though we are beginning to see a gradual shift in consumer tastes to smaller vehicles, it will be a while before we see many Americans ready to abandon their bigger vehicles entirely.”
Lawrence Gennari, partner at Choate, Hall & Stewart, LLP
With the stock market entering a modest equilibrium, many emerging growth companies, whether venture-backed or privately funded, are reconsidering financing strategies and looking at their next steps.
Yet, bank financing remains elusive, and many venture capitalists, particularly those previously funding Series A and B rounds, seem to be focused on stabilizing their existing portfolio companies or investing in later stage enterprises. So what’s a technology company to do if it needs financing and hopes to be sold or go public within two years? Consider the following:
Doing more with less. Financings are still getting done, even in this environment. The key is adjusting financing strategy to what is available — and from whom — in the near term. For example, a planned venture round for $7 million may need to be scaled back to a $3 million targeted angel investor offering. Angel investors, both in groups and as individuals, still are reviewing business plans from local companies in compelling industries or with demonstrable near-term financial success, such as achievement of break-even cash flow. Any management team that is formulating plans and presentations for institutional investors should have a parallel plan to reach out to angels.
Milestones matter. Whether the target investor is large or smaller, the questions will be the same. How have you spent existing cash, and how will you apply proceeds from the new financing? Be prepared to demonstrate how past investment led to objective milestones, such as a new upgrade or version of software, registration of unique users, or achievement (or near achievement) of break-even cash flow. For any new offering, you’ll need to show cash outlays that are real, achievable and narrowly tailored to meet near-term milestones. Remember, even if you can’t raise all of the money you ultimately need right now, you’ll position the company for a greater financing valuation later — perhaps in a better or more hospitable economic environment — if you can execute on meaningful milestones this year.
Consider the audience. No financing is “typical” or “standard,” and today, more than ever, investment documents must fit investor objectives. If valuation is stalling discussions, would the investor take convertible debt with a right to participate in future equity rounds at a discount? If future upside protection is the issue, would investors be satisfied with preferred shares carrying an agreed-upon liquidation preference on any future sale? Flexibility and fitting documents to meet stated investor needs is critical — do not draft or present “standard” documents at initial meetings. Angel investor groups will have their own term sheets and documents, while individual angel investors will rely on the company to generate documents later to fit specific discussion points.
Don’t wait to approach investors. How does a promising company with customers, revenue and real prospects find investors, and are any angels still writing checks? The answer is “yes.” Granted, angel investments overall fell in 2008 compared with the year before. Yet the number of deals was relatively unchanged, with 55,480 startup companies raising angel capital, according to the Center for Venture Research at the University of New Hampshire. Most angel investor groups have websites and will respond to online inquiries. The best approach, however, is to approach groups or individual investors through an introduction from someone they trust, which includes fellow investors, an accountant, a lawyer or a banker. The party providing the introduction also might prove to be an important source of information regarding the investor’s preferences, investment appetite and co-investing circle of friends.
Bottom line. Whatever financing strategy you choose, be prepared to think, resize and readjust creatively based on today’s market realities. An innovative and flexible approach is key to raising money now — and for the foreseeable future.
Lawrence Gennari is a partner in the business and technology group at Choate, Hall & Stewart, LLP and an adjunct professor at Boston College Law School. He can be reached at lgennari@choate.com.
Posted by: tplatt@p… / Friday, July 17th, 2009 – 8:36 am EDT
We agree with much of Attorney Gennari’s advice on how to prepare for your pitch to a venture capitalist or other private investors. For bandwidth-constrained founders, they are most concerned with the efficacy of finding and attracting the attention of appropriate investors. From this perspective, entrepreneurs and business execs should consider a forum specifically designed with input from the region’s leading private capital investors to offer an effective and efficient venue for identifying, screening, matching and assessing investment suitability of rapidly growing companies. Speed Venture Summit is New England’s premier event for business executives to speed pitch their growth story to private capital investors: in the course of a single day, they meet face-to-face with six different groups of the region’s leading private capital investors. For more information, please visit www.speedventuresummit.org
The hundreds of billions in rescue funds needed to support banks — and the trillions in implicit subsidies — has brought the question of appropriate institutional size to the forefront of regulatory reform. Not surprisingly, FDIC Chairwoman Sheila Bair and Federal Reserve Chairman Ben Bernanke favor measures collectively intended to limit the size of banks in the future, Bloomberg Newsreports.
Options include raising capital ratios as a bank increases in size, accelerating the increases in fees paid to the FDIC, and lowering the cap on the percentage of nationwide deposits any one bank can take. Overall, the goal is to have “financial disincentives for size and complexity,” according to Bair. Complexity encompasses untraditional banking activities, such as the proprietary trading that drove Goldman Sachs’ (GS) hugely profitable quarter, as well as investing in structured financial products.
There’s no doubt that the majority of large banks took on more risk than they could handle during the last few years. Scale can be helpful in banking, but it can also mean that improper activities are occurring because management’s oversight is less effective. A trillion dollar-plus balance sheet can hide a lot of bad assets and hidden risks. As the too-big-to-fail debate rages on, the real goal is how to avoid a bank that is too-big-to-rescue.
If it seems absurd that the current raft of bailout programs could need to be repeated one day in such a larger size as to be impossible for the U.S. government to finance, consider what’s happening in the financial system now. As certain banks go under (like Washington Mutual) and others are absorbed (like Wachovia) — the result is greater concentration of banking assets under the survivors. I’ve argued elsewhere that this is both a natural and healthy part of market cycles. However, if the government is implicitly supporting existing large banks — keeping them around in the hopes that they can help clean up the mess by taking over other failed institutions — then all bets are off.
The current working plan of regulators and the Treasury Department is to increase concentration in the banking system, but it’s a near-term patch job and the exact opposite of what’s necessary long-term. Promoting stability means promoting an environment where the failure of one does not lead to a potential failure of all, and that’s tough to do when the top handful of financial institutions have huge balance sheets and extensive counterparty entanglements with each other. If that means creating a well-defined line between the dealings of regulated banks and unregulated investment banks or hedge funds, then that discussion should be on the table.
Luckily, America hasn’t yet been confronted with a financial crisis “fix” that exceeds its capacity to borrow. But to ensure that doesn’t happen in the future, institutions need to be appropriately sized so that they aren’t crucial enough to create the hope for financial help when times get tough.
James Cullen edits and writes at CollegeAnalysts.com. He is the vice president of the Boston College Investment Club, which owns shares of GS, but he has no personal position in the stocks mentioned above.
FLYING to Boston for a conference on the global crisis, I went into the famous Harvard Coop bookstore in Cambridge. It was like my favourite candy store, I dashed here and there, picking up books I could not get in Asia and browsed new books that I could not see from Amazon.
Sitting in Harvard amongst the teachers of my teachers, I felt humbled by the collective brain power that gathered there. After all, the former Harvard president is now chief economic adviser to the US President and running the show to rescue the US economy.
There was one consensus – without the US economy recovering, it would be difficult to see a global recovery, but probably, the Chinese economy may be the first to recover.
Let me explain the role of the IMF (International Monetary Fund). Most people don’t understand the idea of the SDR (special drawing rights) and what the IMF does.
In Asia, the IMF is famously remembered for its role in trying to solve the Asian crisis, but many remembered the initials stood for I AM FIRED, because its recommended tough medicine initially created more deflation than easing the pain. Asian crisis countries could not print foreign exchange that they owed, whereas the West can print their own currencies and so ease the pain of crisis.
But so far, the IMF has not played a role in either providing finance nor advice to the large countries, such as the US, UK and European Union, where the banking losses are the most severe.
The IMF medicine will be given to the smaller members who unfortunately repeated the mistakes of Asia to borrow foreign currency more than they could afford.
We have to understand a bit of history to understand the IMF. The IMF and the World Bank were created in 1945 under the famous Bretton Woods Conference. There was a famous debate between the economic adviser to the US Treasury, Harry White and Lord John Maynard Keynes, the most famous economist of his generation, who wanted a global central bank and a global development fund.
In the end, the US Treasury view prevailed – the power of money creation was too important to give to a global agency; it was retained in the hands of the sovereign powers, of which the US was the dominant power after two World Wars.
The present Global Financial Structure was the direct result of Pax Americana, under which the US provided monetary stability and liquidity through the US dollar and a nuclear umbrella for global peace and security.
In exchange, countries opened up trade and investments, following the principles of free trade. Bretton Woods opened up free trade and broke the power of the British Empire to operate under a tariff barrier.
The post-war global development is the direct consequence of the Bretton Woods strategy, just as the present crisis demonstrated its inadequacies and flaws.
Can the IMF be a global central bank? The common definition of a national central bank is that it is an issuer of the national currency, responsible for monetary stability, systemic financial stability and domestic payment system and also financial adviser to the government. Based on this definition, the IMF is not an issuer of global currency, it has some role in global monetary stability, it failed to stop recent systemic financial instability and is not responsible for global payment systems.
It does surveillance work on global standards, provide advice to member countries and did give some useful warning on the recent crisis, but was ignored. So it is not the global central bank. Indeed, the IMF is not even the central bank of central banks. That is the role of the Bank for International Settlements, based in Basel, which is the secretariat for central bank discussions, the Financial Stability Forum (now Board), the Basle Committee for Banking Supervision, the International Association of Insurance Supervisors and other central bank committees.
Basically, the IMF has a balance sheet of about US$350bil (available resources of US$225bil) and a staff of 2,600, based mainly in Washington DC.
It is remarkable how the IMF almost had no lending to its members by 2007 and just laid off a lot of its experienced staff. By 2009, it was scrambling to give loans to several crisis economies and the G20 had just promised to increase its resources to US$1 trillion.
Is it enough? If you think that the IMF has just announced that Western banks probably lost US$4.2 trillion, and that global cross border banking is US$4.5 trillion, the new resources are helpful, but the task is huge.
Life cannot be easy for the deputy sheriff responsible for global financial stability, since he cannot influence the sheriff who hired him in the first place. The deputy gets blamed for the tough medicine applied to the smaller members, but he cannot apply the same medicine for the sheriff. It is not an equal world.
Don’t get me wrong. The IMF did not cause the financial crisis and can do a lot to ease the pain. It is an important provider of global public goods. But until its legitimacy and credibility is given to it by its dominant shareholders, it cannot be the global central bank, which is probably what the world really needs.
? Think Asian – Datuk Seri Panglima Andrew Sheng is adjunct professor at Universiti Malaya, Kuala Lumpur, and Tsinghua University, Beijing. He has served as adviser and chief economist to Bank Negara, deputy chief executive of the Hong Kong Monetary Authority and chairman of the Hong Kong Securities and Futures Commission.
As the nation’s first Latino Supreme Court justice is set to be sworn in today, Boston will welcome its first-ever convention of Latino professionals.
Some 2,000 members of the Association of Latino Professionals in Finance and Accounting are expected to gather here starting today for their national convention.
A Greater Boston Convention & Visitors Bureau official said this will be the biggest gathering of Latino professionals ever in the Hub.
The association’s Boston chapter – which has more than 1,500 members – is the nation’s largest, said Romina Wilmot, vice president of marketing and public relations for the Hub chapter.
She attributed the Boston chapter’s success to its leadership and the region’s growing number of Latino professionals. In the past decade, Boston’s Latino population has grown 21 percent, to 103,000, according to city data.
“We have had very strong and active leaders, who are very passionate about this group,” said Wilmot, a former advertising specialist for Marshall’s who relocated from Honduras to Boston as a young girl.
The conference runs through Wednesday and association members will be gathering in three different hotels in the Copley Square area.
As attendees gather for their first day of meetings, many will be celebrating Sonia Sotomayor’s swearing in as Supreme Court associate justice.
“I’m sure everyone will be discussing that,” Wilmot said.
A 78-unit apartment building and a museum focused on local history became the front-runners yesterday in a competition to develop a sliver of land that would become the cornerstone of a public market district along the Rose Fitzgerald Kennedy Greenway.
The proposals, both of which call for a food market on the ground floor, were singled out yesterday by the Boston Redevelopment Authority as the most consistent with its plans for the property, located next to the weekend gathering of Haymarket vendors on Blackstone Street.
The news came a day after city and state officials raised financial concerns about the only two proposals submitted for a market in an adjacent building known as the parcel 7 garage. City officials want to use that building and the land discussed yesterday, known as parcel 9, to create an expansive public area for local growers for food sellers.
One of the favored proposals for parcel 9 was submitted by Boston Museum, which wants to construct a glass and terra-cotta building with four floors of interactive exhibits above the market. The other was submitted by Eastat Realty Capital, of Boston, which is proposing to build apartments and a parking garage over the market.
The BRA offered support for the proposals in a letter to the Massachusetts Turnpike Authority, which owns the property and is collaborating with city officials to select a developer. The authority will make the final decision. The district the agencies are trying to create what would house the first public market in Boston since the 1950s and would resemble public food markets operating in most major cities across the United States.
Parcel 9, a triangular plot used for storage by the Haymarket vendors, attracted four proposals after the Turnpike Authority began soliciting bids in February. City officials did not make a clear recommendation in yesterday’s letter, but indicated the museum proposal is consistent with their economic development goals, and that the apartment building complies with planning documents that call for housing on the property.
“We want a viable project that can happen quickly,’’ said Peter Gori, a senior manager at the BRA. “Realistically, we think we could see this come together within the next couple of years.’’
The BRA’s letter did express concern aboutboth Eastat’s apartment plan and the museum proposal. It stated the museum’s executives face a long struggle to raise $120 million to build the facility and must address traffic issues.
Frank Keefe, chief executive of the nonprofit organization seeking to build the museum, said both issues can be resolved. “Our project will animate the Greenway, and it’s the best museum site in the country,’’ he said.
The BRA said Eastat’s apartment plan could be problematic, due to noise from the market on the first floor. Chris Tsouros, a lawyer for the developer, said the company is seeking to address that with the building’s design and by putting the garage between the market and the residences. “We recognized that characteristic from the beginning and built it into our plans for the site,’’ he said.
Two other proposals for parcel 9, submitted by the DeNormandie Cos., of Boston, and Gutierrez Co., of Burlington, were reviewed in the BRA’s letter, but were not mentioned in a summary discussing the authority’s preferences.
DeNormandie, which owns buildings facing the site on Blackstone Street, proposed art galleries or offices above a market and a restaurant. Philip DeNormandie said he had not seen the BRA’s letter last night and was not prepared to comment.
Gutierrez proposed building offices above a market, retail store, and restaurant. A managing director of the company, Bill Caulder, said the company considered residences but concluded the parcel is too small to include amenities such as a gym and a business center, making it difficult to compete with surrounding projects, such as the nearby Avenir apartment complex.
It was a rough night for the two Massachusetts chefs competing in “Hell’s Kitchen,” which premiered Tuesday on Fox TV.
Fitchburg diner owner David “Louie” Cordio was booted in the middle of dinner service by chef Gordon Ramsay – the only contestant in six seasons to be kicked off the reality TV show even before the first elimination ceremony.
The two-hour show ended with a cliffhanger. Fans of Boston chef Andy Husbands, nominated by his team for elimination in the second round, will have to tune in next Tuesday to see if he’s dispatched.
It was a memorable, if short, run for Cordio, who in one scene doffed his shirt to do a champagne-fueled cannonball into a hot tub.
Now he wants to go mano-a-mano with Ramsay outside the kitchen. “Put all the spatulas and spoons aside,” Cordio, 45, said. “I just want a cage match.”
So is Cordio bitter about his early exit and Ramsay’s criticism of his signature dish? “It’s TV, what can you do?” he said. “Somebody has to go out first. I just think chef Ramsay is a clown, if you ask me.”
The 16 “Hell’s Kitchen” contestants had 45 minutes to prepare their signature dishes for the series’ first challenge, and Cordio made sausage gravy over biscuits.
“Ah, (expletive) me, what is it?” was Ramsay’s first reaction.
Cordio asked Ramsay what was wrong with the dish, noting he sells “5 gallons” of it a week at his 50/50 Diner in Fitchburg. “It tastes like gunk!” Ramsay replied after spitting out a mouthful.
The final straw for Ramsay was Cordio’s performance on the meat station on opening night of the Hell’s Kitchen restaurant. After reaming Cordio for putting the rack of lamb in the oven without searing and seasoning it – and wasting a heaping plate of it – Ramsay ordered him to get out of the kitchen and pack his bags.
But Cordio had a parting shot for Ramsay in his final closeup: “He can kiss my (expletive) ass!”
Tremont 647 chef Husbands, who also failed to win a point for his signature dish, had problems with allegedly undercooked chicken during the second night of dinner. “It was tough, and I definitely goofed some stuff up,” said Husbands, who was hit with one of Ramsay’s “you (expletive) donkey” insults.
Husbands was sweating it in the hours prior to the show’s airing, as evidenced by his Twitter tweets. He went from a “little” nervous to “losing my mind” and “head about to explode” a few hours before.
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More Boston Restaurant News
A new jazz lounge and eatery is headed to Columbus Avenue in Boston’s South End.
The Stork Club Boston is drawing its inspiration from speakeasies and its name from the former Stork Club that operated in New York City from 1929 to 1965 and drew the likes of Charlie Chaplin, Ernest Hemingway, J. Edgar Hoover and the Kennedys.
It’s taking the place of Circle Plates and Lounge, an upscale French restaurant that opened last October in the former Bob’s Southern Bistro space and closed six weeks later.
Managing partner Ziad Chamoun, previously director of operations for the Barking Crab restaurants in Boston and Newport, is buying out the current owner.
“The goal is to bring back a place where there’s conversation and music, and artists and people from different groups within Boston can come in and enjoy,” spokesman Marc Deley said. “There will be weekly live jazz music, but it will be more atmospheric jazz.”
The 88-seat Stork Club Boston is slated to open Aug. 11.
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Executive chef Jeff Poliseno’s menu of comfort food “with a twist” that’s meant to be shared will be served until 1 a.m., an hour before closing, with prices of $7 to $17. Poliseno formerly worked at American Seasons on Nantucket and as executive chef at Boston’s Vox Populi.
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A little bit of news on the restaurant replacing Excelsior at Boston’s Heritage on the Garden.
London’s Marlon Abela Restaurant Corp., which Himmel Hospitality is partnering with to run the restaurant, has posted a help-wanted ad for a “Provencal-style bistro.”
The Turning the Tables column runs every other Friday. Send restaurant tips to
The Boston Globe will soon begin charging for its Web site, publisher P. Steven Ainsley told the paper’s union bosses yesterday as the Globe’s parent New York Times [NYT] Co. confirmed in a regulatory filing that the money-losing Hub broadsheet is for sale.
News of the Globe’s intention to charge for Boston.com came a day after News Corp. [NWS] Chairman Rupert Murdoch announced his company would start charging for content at all of its news Web sites, including the New York Post, The Times of London and The Sun, a popular British tabloid. News Corp. already charges for some access to The Wall Street Journal’s Web site.
Globe spokesman Bob Powers said charging for Boston.com appears inevitable.
“It’s going to happen one way or another,” Powers said. “We are looking at several different options, and the goal would be to generate revenue.”
Ainsley also told Globe union bosses the combination of price increases and labor cost reductions, including $20 million in union concessions, have put the paper on better financial footing.
He said union concessions, plus $8 million in Globe management givebacks and the $18 million the company expects to save by closing its Billerica printing plant, have all helped, sources said.
The Times’ quarterly report filed yesterday shows the company spent $30 million to close its Billerica printing plant. Sources have told the Herald that at least one outside party was interested in the plant, but was rebuffed.
Ainsley refused to answer questions about the potential sale of the Globe at yesterday’s meeting, saying his Times Co. overlords had ordered him to keep mum.
BOSTON (Reuters) – Young investors may accept the argument that those who begin investing when stocks are cheap end up with more retirement money, but after the turmoil of the past year, some find it hard to put their money in the market.
Asset managers and analysts say that those who invest in rock-bottom stocks of a bear market will see share values rise for decades.
But many in their 20s and early 30s are not buying rosy projections, due to immediate financial pressures and exposure to the longest recession since the 1930s Great Depression.
“I would keep all my money in cash,” said Alex Corbacho, a senior at Boston University.
The trend has some worrisome long-term implications. Stock brokers may find themselves largely shut out of a big customer base, and demand for equities will likely be crimped as investors favor safer havens, hurting the stock market’s prospects. It’s also unclear whether these young investors will have accumulated enough to fund their retirements when the time comes.
Corbacho is no stranger to markets. At age 13 he invested his birthday money and a matching donation from his father, $1,000 in total, in tech stocks only to feel the sting when the Internet bubble burst.
He carried the lesson with him in early 2008, after seeing signs of economic trouble as an intern at a Boston investment bank. He put the majority of his stock investments, which had reached about $5,000, into a certificate of deposit instead.
Corbacho doesn’t plan returning to stocks for a few years after graduation and is instead focusing on saving.
The recent market collapse has made holding cash for immediate expenses far more attractive to young people than investing, said Rodger Smith, managing director of Connecticut consulting firm Greenwich Associates.
“They are taken aback by how much they lost and how quickly they lost it,” Smith said.
The early exposure to such dramatic declines could restrain many from investing aggressively when they are older and have accumulated more money to put into the market, some say.
Asset managers, financial advisers and investors agree that young people will emerge from the financial crisis more educated, and more cautious, about managing their money.
“I do think they are taking a more practical and slightly more conservative view of the world,” said Michael Doshier, vice president of Fidelity’s Workplace Investing Group.
Corbacho said his generation should not expect to accumulate sudden wealth like some in the past.
“We might be a little smarter and a little wiser moving forward. We will have been more conservative and more observant and won’t have 65 percent of our life savings invested in equities,” he said.
Assets in U.S. retirement plans fell 22 percent in 2008 or nearly $4 trillion, with almost 75 percent of the drop in the second half of 2008, the Investment Company Institute found.
“These folks need to be resold on the idea that a 401k is a long-term investment,” said Smith, who oversees a profit-sharing plan for his firm and advises younger investors.
LONG-TERM CONCERNS
Financial advisers have long suggested that those further from retirement invest more heavily in equities, then switch to less risky assets as they near their golden years.
But the portfolios of those in their early 20s don’t reflect that advice. At Fidelity Investments, those 20-24 years old invest 31 percent of their 401ks in equities, compared to those 50-59 years old with 35 percent equities investments.
Overall, those saving for retirement have pulled back from stocks. In June, 48 percent of all Fidelity 401k participants were in equities, down from 53 percent a year ago.
Those in the investment industry say young investors should buy stock early and often.
“The key message is that it’s not a bad time for everybody,” said Christine Fahlund, senior financial planner at T. Rowe Price.
Ita Mirianashvili, a 35-year-old fellow at Massachusetts Institute of Technology’s Sloan School of Management, has confidence in long-term stock market prospects.
“I know the downturn cycle we are in will continue for some time but it will come back,” she said outside a MIT class that simulates a stock trading room.
But concerns about inflation, heavy government spending and rising bankruptcies has left many young investors uncertain.
“It’s still difficult to be bullish … for the long-run,” said Ashan Walpita, a 2009 Boston University graduate and former president of the school’s finance club.
Other short-term obstacles may hold young investors back. Employer-sponsored retirement plans often give people their first market exposure but with many graduates not finding work, they are yet to get started on making investments.
Public passions are rising on health care overhaul
WASHINGTON — Booed, jeered and occasionally cheered in a raucous session with the public, a Democratic senator said Monday that other lawmakers can expect the same as they face voters on the divisive issue of overhauling health care.
“I wouldn’t be surprised if that’s the harbinger of things to come,” Pennsylvania’s Sen. Arlen Specter said a day after facing the rowdy crowd in Philadelphia. A House member who was surrounded by protesters shouting “Just say no!” to Democrats’ health plans in Texas over the weekend accused Republicans of organizing the opposition.
“This mob … did not come just to be heard, but to deny others the right to be heard. And this appears to be part of a coordinated, nationwide effort,” Rep. Lloyd Doggett, D-Texas, said in a statement. “What could be more appropriate for the ‘party of no’ than having its stalwarts drowning out the voices of their neighbors by screaming ‘Just say no!’”
With Congress’ monthlong recess looming, lawmakers are encountering growing public doubts about President Barack Obama’s push to remake the system for providing medical care, evident in polls that find confidence in the president’s handling of the issue has fallen since January.
Turn Your Head and Gag!
The White House is determined to frame the debate on its terms this month and counter fears about government-run insurance plans, a growing federal deficit, the impact on small businesses, abortion and end-of-life provisions — all issues that have dominated the health care debate. Political parties and special interest groups will add to the cacophony by spending millions of dollars on competing ads.
For lawmakers such as Specter and Doggett, the weekend events captured the public mood and the obstacles for the Obama administration.
At Specter’s forum Sunday in Philadelphia, some chanted Obama’s “Yes we can” campaign slogan, while others carried signs that said, “Tell Washington no.”
Specter and Health and Human Services Secretary Kathleen Sebelius faced an antagonistic, standing-room-only crowd at the National Constitution Center. Specter said he thought political organizations orchestrated some of the commotion, but individuals with serious concerns — some in dire medical conditions — were there as well.
“I do think there’s a big concern in America,” Specter said in an interview Monday. “We heard it yesterday about the growing deficit and national debt.”
Specter is a recent Republican-turned-Democrat who indicated earlier this year that he’s open to a government health insurance plan that would compete with private insurers, an idea backed by Obama and many Democrats.
Four of five congressional committees have approved versions of health care bills, but lawmakers fell short of Obama’s deadline for the House and Senate to vote on bills before their August recess. That sets up a September showdown on the legislation and all sides have moved into high gear.
The House has begun its recess, with the Senate to follow on Friday, as lawmakers continue to work on bipartisan legislation.
Frustrated with the pace of those talks, Democratic leaders promised to push a sweeping health care bill through the Senate whether they get Republican support or not.
Sen. Chuck Schumer, D-N.Y., the third-ranking Senate Democrat, raised the prospect of the leadership crafting a bill to Democratic specifications and using a rare legislative procedure to expedite it.
“We will have contingencies in place,” Schumer told reporters on a conference call. “These plans will likely be considered as a last resort, but they are on the table.” He would not elaborate.
After numerous delays, three Democrats and three Republicans on the Senate Finance Committee are facing a Sept. 15 deadline to wrap up secretive talks and come up with a plan.
“If we cannot produce a bipartisan solution by then, you have to wonder if the Republicans will ever to be willing to agree to anything,” Schumer said.
However, one of the negotiators — Republican Sen. Mike Enzi of Wyoming — said Monday he did not recognize such a deadline, and another, Sen. Olympia Snowe, R-Maine, said: “I don’t like deadlines.”
After those objections were voiced, Finance Chairman Max Baucus, D-Mont., said that senators were looking at a target date internally but “the main thing is we got to get it right.” Baucus said a draft bill would be ready by the end of this week.
Senators have plenty of action on the Senate floor this week, including a vote on Judge Sonia Sotomayor’s Supreme Court nomination, but health care is still a focus. Senate Democrats are lunching at the White House Tuesday and will hear from White House adviser David Axelrod and Deputy Chief of Staff Jim Messina at a closed-door session Thursday.
Schumer said Democratic leaders continue to look at invoking a procedural maneuver that would allow them to pass the health bill with 51 votes instead of 60. That route is viewed as a last resort, in part because it would probably limit the breadth of policy initiatives.
On the same call, Sen. Robert Menendez, D-N.J., accused Republican leaders of trying to hinder bipartisan progress to deny Obama a political victory.
Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell, R-Ky., scoffed at the complaints. He noted that Schumer himself hasn’t committed to supporting whatever the Finance Committee negotiators produce and that other Democrats have also criticized the plan that’s taking shape.
“Seriously, how can any Democrat who doesn’t support what the bipartisan group of Finance members is working on complain about there not being a bipartisan approach?” Stewart asked. “Has Sen. Schumer or anyone in the Democrat leadership offered a bipartisan bill?”
Schumer and many other liberals favor a strong new government-run insurance plan that would compete with private insurers, and all the plans approved so far have included that. But Republicans nearly uniformly oppose a new public plan, saying it would drive private insurers out of business, so the Finance negotiators are looking at a system of nonprofit health co-ops instead.
Schumer said negotiations on the Finance bill were continuing.
“No one’s drawing any lines in the sand right now, but I feel very strongly we need a public option and that fight is continuing,” he said.
Associated Press writer Erica Werner contributed to this report.
GE stock rises after Barney Frank says it should keep finance unit
By: Rachel Layne and Alexis Xydias
Bloomberg News July 30, 2009
General Electric Co. rose the most in three months after U.S. Representative Barney Frank said manufacturers that already own finance businesses should be allowed to keep the units under revised banking rules.
GE increased 92 cents, or 7.5 percent, to $13.18 at 10:27 a.m. in New York Stock Exchange composite trading. The shares earlier climbed 8.8 percent, the biggest intraday gain since April 13.
GE, Harley-Davidson Inc. and companies that already have finance arms or industrial-loan businesses known as ILCs should be able to retain them without being subject to Federal Reserve oversight of their manufacturing operations, Frank said in an interview with Bloomberg News yesterday. Frank, a Massachusetts Democrat, heads the U.S. House Financial Services Committee.
“While numerous uncertainties remain, we are reducing our probability assumption for a costly separation to 25 percent from 50 percent and this drives our higher target,” Terry Darling, an analyst with Goldman Sachs Group Inc., wrote today in a report. “Greater potential for a manageable regulatory outcome should prompt investors to focus on longer-term benefits of economic and credit stabilization to GE shares.”
Darling raised his 12-month share-price estimate for GE to $15 from $13 and changed his rating to “buy” from “neutral.”
GE Capital
GE, the world’s biggest non-bank financial company, said July 28 during a Webcast meeting with analysts that it has been “very active” in opposing any rules that might force it to split off its GE Capital finance unit, which has $557 billion in assets. GE is also the world’s biggest maker of power-plant turbines, locomotives, medical-imaging machines and jet engines.
Steven Winoker, an analyst at Sanford C. Bernstein & Co. in New York, raised his estimate for GE’s 2009 per-share profit by 3 cents to 99 cents. He lowered his 2010 estimate by 3 cents to 94 cents a share on concerns profit growth in the non-finance divisions may slow.
“The risk/reward balance is improving over a longer, about three-year, time horizon,” Winoker wrote in a note to clients today. “However, we believe the stock is likely to remain range-bound in the near term due to skepticism concerning GE’s earnings power and the potential for dilution.”
Credit-default swaps protecting against a default by GE Capital fell 35 basis points to 260 basis points, according to CMA DataVision.
Financial Regulation
President Barack Obama’s administration is seeking to tighten regulation of the financial industry to reduce the likelihood that any one company’s potential failure would hurt the broader markets and economy. Frank, a leader in Congress in transforming Obama’s plan into legislation, said this week he plans to get the bill through the House by October and to Obama for his signature before the end of the year.
“The Fed was worried about being a regulator, about being held responsible for a lot of industrial activity,” Frank said. “We will work with them to resolve that issue.”
There are ways to allow companies like GE to stay intact and have their finance arms regulated more closely, Frank said. The structure didn’t cause the financial crisis, and it shouldn’t be an obstacle to regulation, Frank said.
“This particular arrangement is not part of the problem,” Frank said.
To contact the reporters on this story: Rachel Layne in Boston at rlayne@bloomberg.net; Alexis Xydias in London at axydias@bloomberg.net.
Former MIT computer scientist Jim Psota hopes that Panjiva can attract more gatherers of esoteric data to help serve traders.
When the world financial markets fell apart last fall, the prognosis was dire for startups bent on selling information technology to financial services firms. But entrepreneurs and investors in Massachusetts’ financial services IT sector didn’t blink: And now, three new companies founded or funded here are developing new models for both individual investors and data-driven money managers.
Panjiva Inc., a New York company with a Cambridge-based development team, is aggregating, cleaning and analyzing global trade data. Another New York firm, Covestor Inc., has taken funding from Boston-based Spark Capital for a service that allows users to automatically co-invest with other investors. A third company, Lexington-based StreamBase Systems Inc., has applied its real-time complex event-processing engine to the rising global tide of micro-blog posts on Twitter.
Providing investors with new sources of information, however obscure, remains a good business model, said Battery Ventures general partner Michael Brown, who invested in Panjiva. “When it comes to the guys who are managing money, it’s all about that little nugget of data that you can use,” he said.
Founded in 2007 by MIT computer scientist Jim Psota and former Boston Consulting Group associate Josh Green, Panjiva has taken in $5.5 million so far from Battery and a dozen angel investors. Its data sources include the U.S. Department of Homeland Security shipping records, reports from overseas factory inspectors, and a Chinese government insurer’s due diligence on eight million companies. Last week, the company launched a partnership program designed to attract other gatherers of esoteric data relevant to trade.
The two originally envisioned a customer base of importers, but Panjiva has seen growing interest from the data distribution channels that target investor communities, Green said. Overseas factories often shutter with no warning, crippling a company’s supply chain. “To the investor community, there’s often little transparency about how much (supply chain) risk those companies are facing,” he said.
Last week, StreamBase, founded in 2003 by serial entrepreneur Michael Stonebraker, announced it had adapted its complex event processing system to support semantic analysis in real time on the stream of comments and dialog on the microblog sharing service Twitter.
“It’s pretty well understood on Wall Street that companies with the best data are going to make the most money,” said StreamBase CTO Richard Tibbetts. Changing trends in brand sentiment on Twitter may be the data point that influences a decision, he said.
Covestor hopes to capitalize on trends at the opposite end of the pool, where private individuals are disillusioned with Wall Street money managers. The company’s online service, launched last week, is designed to let investors piggy back on trades and investments made by a single other investor — who may or may not be a professional.
“Right now, you’re only able to follow the however many thousand professionals around the world,” said co-founder Perry Blacher. “We all know people we think are good at investing. Why can’t I invest alongside one of them?”
To navigate prohibitions against paying commissions to nonqualified, private investors, Covestor treats its record of investors’ trades as publishable information and charges a subscription fee, Blacher said. Followed investors receive $120 a year per subscriber, and the company itself reaps a fixed management fee of 0.5 to 1.5 percent.
Covestor is similar to existing services like the Motley Fool website’s Caps network, which lets investors share predictions — except it takes out the work of researching and making investments yourself, said Richard Gibble, director of the Hughey Center for Financial Services at Bentley University.
For investors chary of part-time day trading and mistrustful of Wall Street money managers, that “plug-and-play model” may be a compelling offering, he said. “The markets are complicated,” Gibble said. “Even if you know what you’re doing, it’s not easy to make money. Even for me, I like to think I know what I’m talking about, but it takes a lot of time. If you don’t have that time, you have to outsource it.”
Awesome Foundation attracts small-project entrepreneurs
About 50 people turned up at the BetaHouse technology co-working space in Cambridge last night to hear how they could get $1,000 to fund their own “awesome” pet project.
Twelve trustees have each agreed to contribute $100 a month to the loosely organized “Awesome Foundation,” which promises $1,000 each month to fund “awesome” projects.
“It’s just that extra spark to push people to be creative and try out their idea,” said trustee Emily Daniels. “I could spend that $100 on some random shopping trip, or I could inspire someone to do something great. I don’t know why more people don’t do this.”
Daniels, who directs an English-language-learning program in Cambridge and helps organize the creative electricity maker community Dorkbot-Boston, is typical of the tech-minded trustees at the Awesome Foundation.
However, many of the 250 ideas submitted so far have nothing to do with technology, and that’s okay with founder Tim Hwang. “We do want to establish ourselves as an organization that funds a whole range of different things,” he said.
Hwang said the new initiative has received requests from people wanting to start chapters and sign up trustees in four countries. For now, he said, the number of trustees will remain limited while the group establishes itself, he said.
Trustee Matt Lake, a programmer at Watertown-based health care IT company Athenahealth Inc., said as long as the project is feasible, ethical and legal, it doesn’t matter whether it is sustainable over the long-term. “I want to see something eye-opening and inspirational,” he said.
“It’s kind of the broken windows theory, in reverse,” said trustee and BetaHouse co-founder Jon Pierce, referring to the social theory that minor crimes like vandalism or illegal dumping, unchecked, can lead to serious crime. “If you flip that on its head you can say here’s all this great stuff going on, and we’re going to showcase it and encourage it.”
By KEN THOMAS, Associated Press Writer Ken Thomas, Associated Press Writer
WASHINGTON – The White House said Thursday it was reviewing what has turned out to be a wildly popular “cash for clunkers” program amid concerns the $1 billion budget for rebates for new auto purchases may have been exhausted in only a week.
Transportation Department officials called lawmakers’ offices earlier Thursday to alert them of plans to suspend the program as early as Friday. But a White House official said later the program had not been suspended and officials there were assessing their options.
“We are working tonight to assess the situation facing what is obviously an incredibly popular program,” White House press secretary Robert Gibbs said of the Car Allowance Rebate System. “Auto dealers and consumers should have confidence that all valid CARS transactions that have taken place to date will be honored.”
Gibbs said the administration was “evaluating all options” to keep the program funded.
A Transportation Department official said the department was working with Congress and the White House to keep the program going. The administration officials spoke on condition of anonymity because they were not authorized to speak publicly about the discussions.
The CARS program offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle.
Congress last month approved the program to boost auto sales and remove some inefficient cars and trucks from the roads. The program kicked off last Friday and was heavily publicized by car companies and auto dealers
Through late Wednesday, 22,782 vehicles had been purchased through the program and nearly $96 million had been spent. But dealers raised concerns about large backlogs in the processing of the deals in the government system, prompting talk of a possible suspension.
A survey of 2,000 dealers by the National Automobile Dealers Association found about 25,000 deals had not yet been approved by NHTSA, or nearly 13 trades per store. It raised concerns that with about 23,000 dealers taking part in the program, auto dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.
“There’s a significant backlog of ‘cash for clunkers’ deals that make us question how much funding is still available in the program,” said Bailey Wood, a spokesman for the dealers association.
Alan Helfman, general manager of River Oaks Chrysler Jeep in Houston, said he was worried that the government wouldn’t pay for some of the clunker deals his dealership has signed because they aren’t far enough along in the process.
His dealership has done paperwork on about 20 sales under the clunker program, but in some cases the titles haven’t been obtained yet or the vehicles aren’t yet on his lot.
“There’s no doubt I’m going to get hammered on a deal or two,” Helfman said.
The clunkers program was set up to boost U.S. auto sales and help struggling automakers through the worst sales slump in more than a quarter-century. Sales for the first half of the year were down 35 percent from the same period in 2008, and analysts are predicting only a modest recovery during the second half of the year.
So far this year, sales are running under an annual rate of 10 million light vehicles, but as recently as 2007, automakers sold more than 16 million cars and light trucks in the United States.
Even before the suspension, some in Congress were seeking more money for the auto sales stimulus. Rep. Candice Miller, R-Mich., wrote in a letter to House leaders on Wednesday requesting additional funding for the program.
“This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn,” Miller said Thursday. “The federal government must come up with more money, immediately, to keep this program going.”
Michigan lawmakers planned to meet on Friday to discuss the program.
Brendan Daly, a spokesman for House Speaker Nancy Pelosi, D-Calif., said they would work with “the congressional sponsors and the administration to quickly review the results of the initiative.”
General Motors Co. spokesman Greg Martin said Thursday the automaker hopes “there’s a will and way to keep the CARS program going a little bit longer.”
___
AP Auto Writer Tom Krisher in Detroit contributed to this report.
Allure of $4,500 boost for trade-in pulls buyers into auto showrooms
Cash for CLUNKERS
By Sean Sposito, Globe Correspondent | July 30, 2009
Massachusetts auto dealers say the new “cash for clunkers’’ voucher program is giving them a much-needed boost in business this week.
The federal promotion – which offers buyers an instant discount of up to $4,500 when a qualifying vehicle is traded in for a new, fuel-efficient model – was rolled out over the weekend, and by yesterday dealers were reporting a jump in sales. Buyers have an additional incentive, too – avoiding the 25 percent increase in the state sales tax that takes effect Saturday.
While there have been complaints that the program is too complicated and won’t ultimately cure automakers’ ills, for now area dealers are just happy to see customers flocking to their showrooms.
“It’s the best week in several years for people in the automotive industry,’’ said Dan Quirk, president of Quirk Auto Dealerships. Quirk said the prospect of shaving thousands of dollars off the price of a car is driving up activity at his 10 showrooms.
Quirk said he usually sells about 1,500 cars a month, but expects to do significantly better in July. “We’ve probably sold 350 just this weekend, 120 through cash for clunkers,’’ he said.
Kevin Haggerty, 60, of Pembroke was shopping at Quirk Chevrolet in Braintree on Monday, hoping to trade in his 1999 Ford F-150, which he estimates is worth around $1,600, as a clunker. The Chevrolet Colorado he was eyeing had already been sold, but Haggerty expects to eventually buy a new car under the voucher program.
“I’m 90 percent sure that I’m going to make a move, unless something is too pricey,’’ he said.
Juan Banos, lead sales manager at Expressway Toyota in Dorchester, said his dealership closed about 30 cash for clunkers deals over the weekend alone. Banos said that even if the program increases monthly sales modestly, he’ll consider it a success.
“An extra 10 to 30 deals, we make at least an average of $1,000 per deal, that’s $30,000 for the dealership just in one weekend,’’ he said. “That could either make it or break it, as far as quotas go.’’
Gregg McCutcheon of Brockton said he was motivated to shop by the promise of cash for clunkers, formally the Car Allowance Rebate System, or CARS. The $1 billion program, which will run through Nov. 1 – or as long as the funds last – allows $3,500 to $4,500 trade-ins on cars that get less than 18 miles per gallon and are less than 25 years old. The money can be applied only toward new cars, and there are other restrictions.
“Cash for clunkers is what got us out here,’’ said McCutcheon, 57, after he bought a car from Mansfield Jeep-Chrysler. But McCutcheon ended up with a 2007 Chrysler Town & Country van instead of a current model.
“I’m 6-foot-6,’’ he said. “The dashboards on the new ones seemed to come out a little bit further, so I picked up a used one.’’
Not buying a new car meant McCutcheon wasn’t eligible for the CARS program, however.
Despite the upbeat moods in showrooms, some dealers said the paperwork associated with the federal program has been overwhelming. Reidar Davies, general sales manager of Prime Honda in West Roxbury, said his dealership has already written more than 40 cash for clunkers deals, but it has required a lot of extra effort.
“The paperwork is extremely, extremely rigorous and demanding,’’ he said. “It requires a ton of data entry.’’
And submitting the deals for government approval online has been painfully slow, Davies said.
Melissa Steffy, general manager at Herb Chambers BMW and Mini in Boston, said sales made with customers over the weekend are just now getting processed online.
“It’s a matrix to put these deals together,’’ Steffy said.
Even signing up to participate in the program was a headache for some dealers. Karen Aldana, a spokeswoman for the National Highway Traffic Safety Administration, said more than 20,000 of the nation’s 25,000 auto dealers have enrolled in the program. But the demand was so high that some dealers could not get onto the agency’s website, she said.
Some local auto industry officials are trying to put the promotion in perspective. With Chrysler merging with Fiat to survive, and General Motors emerging from bankruptcy propped up by $50 billion in taxpayer funds, no one is saying automakers’ troubles are history.
“It’s a $1 billion program and the money will go fast,’’ Quirk said of cash for clunkers. The funding translates to about 225,000 vehicles – just one week of sales across the country.
An ex-Boston magazine scribe insists Boston PR man George Regan called him an ethnic slur, and now there’s a call to block one of the country’s biggest civil rights organizations from honoring the Hub spinmeister.
Regan denies calling John Gonzalez a “wetback,” but the writer is sticking by his story.
Gonzalez said he was working on a piece about the Herald’s Inside Track reporters in 2006 when he called Regan for a comment. Regan represented both the Herald and Boston magazine at the time. (The Herald is no longer a Regan client.)
“I call him for a comment, and he freaks out and he starts screaming at me. We’re going back and forth, and it just escalated out of nowhere and he said, ‘You listen to me, you (expletive) wetback,’ ” Gonzalez said.
Regan said he never called Gonzalez a wetback. “I told him he was very wet behind the ears and I know I’m right,” he said yesterday.
Gonzalez said Boston magazine brought Regan in for a sitdown and the PR king said, “if I said what you think I said and that offended you then I’m sorry.”
Regan said yesterday that he never apologized. “I never apologized because I did nothing wrong. I apologized for losing my temper,” he said.
“I know my business very well,” Regan added. “I know how words can hurt. You don’t have to say anything discriminatory to make your point. And if you have to resort to name-calling, you probably don’t belong in the business.”
The Anti-Defamation League of New England – a Regan client – plans to bestow the media bigshot with its top honor Sept. 9, when Regan will be feted by hundreds at its annual leadership dinner at the John F. Kennedy Library.
The event co-chairs include a bevy of Regan clients, including Legal Sea Foods czar Roger Berkowitz, Suffolk Construction honcho John Fish and Entercom radio exec Julie Kahn.
Berkowitz said he’s known Regan for over 20 years and said he’s never made any derogatory or inflammatory comments about anyone. “It would be completely out of character,” Berkowitz said. “It sounds like someone wants a vendetta.”
Earlier this month, the ADL received an anonymous letter detailing the Gonzalez-Regan exchange.
ADL exec Derrek Shulman said they plan to go ahead and honor Regan because he’s been a tremendous community leader for 25 years. “Apparently, George said no such word or words and there was some kind of misunderstanding,” Shulman said.
Gonzalez says Regan shouldn’t be honored.
“He’s achieved a certain status in Boston through fear-mongering, basically, and somebody needs to stand up to him and call him what he is. He’s a bully,” he said.
Microsoft Corp. has finally roped Yahoo Inc. into an Internet search partnership, capping a convoluted cat-and-mouse game that dragged on for years.
The 10-year deal announced Wednesday gives Microsoft access to the Internet’s second-largest search engine audience, adding a potentially potent weapon to the software maker’s Internet arsenal as it girds for an all-out assault against online search and advertising leader Google Inc.
The extended reach will allow Microsoft to introduce its recently upgraded search engine, called Bing, to more consumers. The Redmond, Wash.-based software maker believes Bing is just as good, if not better, than Google‘s search engine. Taking over the search responsibilities on Yahoo‘s highly trafficked site gives Microsoft a better chance to convert Web surfers who had been using Google by force of habit.
“Microsoft and Yahoo know there’s so much more that search could be,” said Microsoft Chief Executive Steve Ballmer. “This agreement gives us the scale and resources to create the future of search.”
In return for turning over the keys to its search engine, Yahoo will get to keep 88 percent of the revenue from all search ad sales on its site for the first five years of the deal, and will have the right to sell ads on some Microsoft sites.
Yahoo estimated the deal — which the companies hope to close next year — will boost its annual operating profit by $500 million and save the Sunnyvale, Calif.-based company about $275 million on capital expenditures a year because it won’t have to invest in its own search technology.
Assuming it can pass antitrust scrutiny, the alliance could give Yahoo a chance to recoup some of the money squandered in May 2008, when it turned down a chance to sell the entire company to Microsoft for $47.5 billion.
Yahoo’s market value currently stands at about $24 billion. Yahoo just came off a tough quarter in search advertising, with its revenue in that niche falling 15 percent in the April-June period.
The two rivals began talking about a possible alliance as far back as 2005 before Microsoft intensified the courtship with last year’s attempt to buy Yahoo.
It took Yahoo’s current chief executive, Carol Bartz, just six months to strike a deal with Microsoft — something that neither of her predecessors, Terry Semel and Yahoo co-founder Jerry Yang, seemed interested in doing.
Shortly after her arrival, Bartz made it clear she was willing to farm out Yahoo’s search engine for “boatloads of money” as long as she as thought the company would still receive adequate information about its users’ interests.
“This agreement comes with boatloads of value for Yahoo, our users, and the industry, and I believe it establishes the foundation for a new era of Internet innovation and development,” Bartz said.
Under the agreement, Yahoo will have limited access to the data on users’ searches — which yield insights that can be used to pick out ads more likely to pique a person’s interest. The value of that information is why Microsoft wants to process more search requests.
Like Yahoo, Microsoft has invested billions in its search technology during the past decade, yet remained a distant third in market share while its online losses piled up. The company’s Internet services division lost $2.3 billion in the fiscal year ending in June, nearly doubling from the previous year.
Microsoft is counting on Bing, unveiled in early June, to turn things around.
Bing has been getting mostly positive reviews and picking up slightly more traffic with the help of a $100 million marketing campaign. Analysts believe Bing’s successful debut pushed Microsoft to reopen negotiations so it could expose its search engine improvements to a wider audience more quickly.
“The reason the deal happened now is the recent success of Bing. I think it put pressure on Yahoo, as well as Yahoo not being able to turn it around on its own,” said Gartner Inc. analyst Neil MacDonald.
Even with Yahoo’s help, Microsoft still has its work cut out. Combined, Microsoft and Yahoo have a 28 percent share of the Internet search market in the United States, well behind Google‘s 65 percent, according to online measurement firm comScore Inc. Google is even more dominant on in the rest of the world, with a global share of 67 percent compared to a combined 11 percent for Microsoft and Yahoo.
It could be a while before Microsoft and Yahoo can begin working together because the partnership is likely to draw federal antitrust scrutiny to ensure the combination won’t have an adverse effect on competition in the online ad market.
The U.S. Justice Department spent five months dissecting a proposed search advertising partnership between Google and Yahoo before concluding that it would give Google too much control over the market.
Microsoft used its lobbying muscle to spearhead the campaign against Google teaming up with Yahoo, so it wouldn’t be a surprise if Google turned the tables.
Under the Obama administration, the Justice Department is promising to pore over technology deals far more rigorously than it did when the proposed Google-Yahoo partnership came up.
Just getting Yahoo to succumb to its latest advance represents a coup for Microsoft and the boisterous Ballmer, who were rebuffed for so long.
Microsoft is doubling down on Internet search at the same time Google is attacking Microsoft’s bread-and-butter business of making software for personal computers.
Google is working on a free operating system for inexpensive personal computers in a move that could threaten Microsoft’s ubiquitous Windows franchise. If it gains traction, Google’s alternative, called Chrome OS, could divert some revenue from Microsoft while the software maker is trying to grab more of the money pouring into search advertising.
Chrome OS, though, isn’t supposed to hit the market until the second half of next year. That means Microsoft could get a head start on Google in the duel to steal each other’s financial thunder.
President Obama’s call to Cambridge police Sgt. James Crowley wasn’t only a turning point in a national firestorm – it was also a big hit among the beer drinkers and eavesdroppers who heard Crowley take the call at Tommy Doyle’s Irish Pub in Kendall Square.
“I ran over to grab some drinks, and the bartender told me, ‘Hey, they’re on the phone with President Obama,’ ” waiter Kyle Shearer said with a nod toward the back table where Crowley had been seated with a group of colleagues. “I couldn’t believe it until I got close enough to hear Obama’s voice.”
Shearer said he overheard the president apologize to Crowley and ask if there was anything he could do. Two days earlier, Obama had suggested Cambridge police had “acted stupidly” by charging Harvard professor Henry Louis Gates Jr. with disorderly conduct.
Minutes after the phone conversation, the president appeared on the large TV screen on the wall of the bar.
“The president was on TV, talking about the man I was standing next to,” Shearer said. “Even I felt powerful. And I’m just a lowly waiter.”
Afterward, the mood of everyone in the pub lifted, he said, and a couple of cops bought a round of Bud Light.
The brush with history left Maine visitors Brad and Tammy Curtis and Roddy and Karen Rublee awe-struck yesterday. For the past 21 years, the friends have made an annual pilgrimage from Bangor to take in a Red Soxgame.
“When we heard the cheer, my husband said, ‘It must be soccer or cricket,’ ” Tammy Curtis said. “I mean, what were the chances of us walking into all that?”
Both Crowley and Gates said Friday they plan to take the president up on his offer to have a beer at the White House.
“I have spent my entire career as an academic attempting to bridge differences and promote understanding among all Americans,” Gates said in a statement released yesterday by his lawyer, Harvard Law professor Charles Ogletree. “To that end, I have pledged to do all that I can to help us learn from this unfortunate incident.”
Bob and Sylvia Myhal bought a new Kia Amani yesterday at Wagner Motor Sales Shrewsbury. (T&G Staff/STEVE LANAVA)
By Priyanka Dayal TELEGRAM & GAZETTE STAFF
Retailers of big-ticket items from refrigerators to cars are preparing for shoppers to come in droves this weekend and make purchases before the sales tax jumps to 6.25 percent on Aug. 1.
Area car dealers say they already have seen an increase in customers and sales this month.
“This is the best month we’ve had in 45 years,” said Don McEwen, general manager of Lundgren Honda in Auburn. “It’s completely unexpected. It’s amazing.”
Herb Chambers, who owns 46 car dealerships in Massachusetts and Rhode Island — and seems to be the only dealer opening new locations this summer — said sales have picked up month after month this year.
“If somebody was planning on purchasing a car in August or September, it’s probably worthwhile for them to buy it in July and save that tax,” Mr. Chambers said. “If you weren’t planning on buying a car this year, then there would be no incentive.”
A customer buying a $25,000 Honda Accord would pay $312.50 more in tax if the purchase was after July 31. For a $44,000 BMW sedan, the tax would be $550 higher after the end of the month.
The sales tax increase is on people’s minds, said Mark Wagner, president of Wagner Motor Sales, which has dealerships in Shrewsbury and Boylston. “This weekend will be the tell-tale, I believe,” he said.
“(Sales) have been touch and go. It’s tough to forecast … People are waiting a little bit longer and seeing what’s out there.”
Bob and Sylvia Myhal walked into the Wagner Kia showroom in Shrewsbury yesterday afternoon, and a little while later, they walked out as the owners of a new Kia Amanti, a $32,000 sedan.
Mr. Myhal said he was pushing to buy a new car before the sales tax hike. “On small purchases, it won’t matter, but on large purchases, it’s going to hurt a lot of people,” he said.
The incentive of a lower sales tax is not the only thing motivating car shoppers. Perhaps the bigger incentive is the federal government’s Car Allowance Rebate System, better known as the cash for clunkers program, which rolls out today.
The program allows owners of old, inefficient “clunkers” to trade them in for a $3,500 or $4,500 rebate toward purchases of new, fuel-efficient cars. The old gas guzzlers get scrapped. Details are at www.cars.gov.
The staff at Lundgren Honda has written more than 20 advance orders for customers taking advantage of the federal program. The Honda Fit, which gets 30 miles per gallon, highway and city combined, is one of the most popular sellers, according to Mr. McEwen.
Dennis P. Pietro, Internet sales director at Harr Toyota on Gold Star Boulevard in Worcester, said customers are looking for economical cars, like smaller SUVs, or pre-owned rather than new vehicles. Business has increased 20 percent over last month.
“By the weekend we’ll probably see 30 to 35 percent more,” he said.
He’s not happy about the sales tax increase. “I think the government is a bunch of (expletive) morons,” Mr. Pietro said. “It is what it is, I guess.”
Lawmakers have said raising the sales tax was necessary to avoid steep budget cuts to important services, including public transit. Retailers say higher taxes will drive more shoppers to the Internet and to New Hampshire.
Jon B. Hurst, president of the Retailers Association of Massachusetts, said retailers have been struggling because of the recession, and because of poor weather in May and June. “Now we’re staring down the barrel of a 25 percent sales tax increase,” he said. “A lot of (retailers) are somewhat shell shocked by the tax increase.”
Although support for another summer sales tax holiday is hard to find on Beacon Hill, retailers are pushing for it. Mr. Hurst said that the holiday did not spur as much spending last year as it did in 2007, but, he said “More than any year prior, we could really use it this year.”
The state said it lost $15 million in sales tax revenue during the tax holiday last year, but Mr. Hurst said that money is made up in other ways: more people working on the weekend means more income tax revenue, and more people shopping means more meals tax and gas tax revenue.
Bernie Rotman, vice president of Rotmans Furniture & Carpet in Worcester, said he’s expecting many customers to make purchases over the next week to beat the sales tax hike. “I think it’s going to be a good thing, but it’s short-lived, and it’ll be a bump,” he said. “Far more impressive would be a sales tax holiday.”
Some stores, including Rotmans and Percy’s, a Worcester TV and appliance store, are offering a 5 percent discount as another incentive to customers.
“They all say the same thing, ‘We want to buy it before August 1,’ ” said Alan Lavine, sales manager at Percy’s, where shoppers are looking for refrigerators, TVs, washers and dryers.
As for what happens in August: “There could be a backlash,” he said. “I’ll worry about that when it happens.”
Now Google parks its tanks right outside Microsoft’s gates
* John Naughton
What’s the toughest question a venture capitalist can ask? Answer: “What will you do if Google enters your market?” The web has been buzzing with speculation that senior Microsoft executives are now asking that question. The truth is that they have been asking it for quite a while. In an intriguing interview he gave several years ago, Bill Gates observed that the only company out there that reminded him of Microsoft in its early days was Google. He didn’t elaborate, but most of the audience knew what he meant: a company that was smart, agile and hell-bent on world domination.
The reason for the excitement last week was Google’s announcement that it was developing an operating system – and dominance of the market for operating systems is the source of Microsoft’s power.
Until now, Google had studiously ignored this part of the market, which seemed like a smart strategy: after all, only a fool attacks on the enemy’s strongest front.
Instead Google concentrated on picking off other pieces of Microsoft territory, starting with Hotmail (attacked with Gmail), MSN (Google Talk), Microsoft Office (Google Docs and Apps) and, latterly, Internet Explorer (the Google Chrome browser).
With the 20/20 vision of hindsight, this can seem like a purposeful route-march towards the ultimate goal – replacement of Microsoft as the dominant company in the computing universe. In that sense the announcement of an upcoming Google OS can indeed be seen as the opening salvo in the final battle.
But there’s another way of looking at it. The intriguing thing about the Google announcement is not that it is developing an OS, but that it is switching tack. For nearly two years the company has been developing a Linux-based OS for mobile phones under the Android label. Most of us who have used Android assumed it was only a matter of time before a version tailored for Netbooks was released.
But that is not what Google announced. There wasn’t much technical detail in the company’s blog post, but the one thing that is clear is that the new OS will be – in its words – “a natural extension of Google Chrome”. It is, they go on to say, “our attempt to rethink what operating systems should be”.
If true, we have reached a significant milestone because what the Google guys propose amounts to turning the world upside down. Up to now, the operating system was at the heart of every computing device, transforming the machine from an expensive paperweight into something that could do useful things – running programs, managing displays, handling keyboard and mouse, etc. And because the OS had to be able to do all of this, it was the largest, most complex and most important piece of software of all.
In the old paradigm, the web browser was just another program the OS had to support. When the PC was the platform, that made perfect sense, but that paradigm has been steadily eroding. As broadband penetration increased, more and more people began to get their “computing” services not from their PC but from server farms over the net. Imperceptibly, we have been moving into a world in which, to repeat an old mantra, “the network is the computer”.
If the network is indeed the computer, then the browser – our window on to the network – becomes the key piece of software. For many people today, the browser is the only program they really need. So it was only to be expected that somebody would eventually ask why we needed vast, clunky, expensive operating systems (such as Windows Vista, say) when really all that is required is a life-support system for a browser. That’s what the Google engineers have asked. Their answer is that only a minimalist OS is now needed, and that is what they are developing – and what millions will be running in the latter part of 2010.
We have been here before. In 1995 the founders of a firm called Netscape had the same idea. If the web was going to be the key application, they reasoned, surely the browser could effectively become the operating system. They were unwise enough to say this in the hearing of Bill Gates, who realised instantly it posed a serious threat to Microsoft’s core product. At that moment, Netscape’s fate was sealed: careless talk costs companies.
But that was then and this is now. And whatever else it may be, Google ain’t Netscape. Ask Mr Gates.
Posted by Boston Money on Sunday, July 26, 2009 at 12:29 am Filed under Featured · Tagged with
Harvard pres.: School has tough choices in decline
By MELISSA TRUJILLO – 18 hours ago
Courtesy of: Associated Press
Billions of lost endowment dollars later, though, Faust faces a much different reality.
“We can’t have chocolate and vanilla and strawberry. We have to decide which one,” she said.
It’s a question few at Harvard expected Faust to be forced to answer in the infancy of her presidency.
Her appointment in 2007 was hailed as a historic turning point for the 373-year-old university. Faust, then the dean of the Radcliffe Institute for Advanced Study and a Civil War scholar, would be the first woman to step into the country’s most high-profile presidency and appeared perfectly suited to cool tensions within the faculty after the controversial five-year tenure of Lawrence Summers.
She would have the nation’s richest endowment to work with — $34.9 billion in 2007.
But by last fall, the crashing economy began to pull down even the country’s most famous university. Its endowment fell to $28.7 billion, and the university estimated it would drop 30 percent for the fiscal year that ended Tuesday. The steep decline is particularly difficult for Harvard, which gets roughly one-third of its budget from endowment earnings.
Much of Faust’s time now is spent figuring out how Harvard can weather the downturn, through layoffs, early retirement packages, cuts in services, even changes to breakfast menus for undergraduates. She said further reductions in the endowment distribution next year will mean more cuts.
“People say to me often now, ‘This must not be what you expected,’ and my response is that it would be foolish not to expect surprises in a university presidency,” Faust said recently, sitting in her office in Massachusetts Hall.
“I’ve used the metaphor of marriage about this, saying I signed on for sickness or health or richer or poorer. And it’s turned out to be quite a ride,” she said laughing.
Most faculty and students still strongly support Faust, despite a general unease on campus about Harvard’s finances. For many, Faust’s warm and inclusive demeanor remains a welcome change from her predecessor.
Summers, now President Barack Obama’s top economic adviser, was pressured to leave after a series of high-profile clashes with faculty — conflicts that worsened after his comments that innate ability may partly explain why few women reach top science posts.
“I think the crucial issue that undermined his leadership was he was extremely abrasive,” said J. Lorand Matory, a professor of anthropology, African and African American studies now planning a move to Duke in the fall. “He did not display a talent for listening to his fellow administrators.”
Faust cited listening as a key component of her leadership, not an easy task at a university notorious for its segmented colleges, schools and institutes, all with their own management.
“I learn what people are telling me, but I also learn where they are politically, where they need to be moved towards in order to get done what we need to get done,” she said.
Faust says part of her desire to look at all complexities of an issue comes from her background as a historian. Her most recent book, “This Republic of Suffering: Death and the American Civil War,” looked at how the vast numbers of soldiers who lost their lives during the Civil War changed how Americans understood and coped with death. It was a finalist for both the National Book Awards and the Pulitzer Prize for history.
“I think historians understand how we’ve been affected by attitudes and assumptions that have shaped our institutions and our families and our socialization,” she said.
She cited her decision earlier this year to save money by pausing construction of a new $1.2 billion science building, the first phase of a planned 50-year expansion into Boston’s Allston neighborhood across the Charles River from Cambridge. The university is now reviewing how much — if any — of the project to continue.
“It’s a very fraught question. It involves the city, it involves the community, it involves constituencies with totally different interests,” she said. When the decision is made, she said, “I think that people will feel that we’ve really thought it through in a considered and responsible way. Moreover, I will know that we will have thought it through.”
Faust has been criticized, though, for being too cautious at the beginning of the economic crisis and for failing to strongly communicate her vision for a new, leaner Harvard. Anger spread on campus last week, for example, when Faust announced the layoffs of 275 employees.
“Because of this sort of mild demeanor, we’re kind of wondering what’s going to happen,” philosophy professor Warren Goldfarb said. “She hasn’t stepped up and said, ‘This is what we’re going to have to do.’ ”
Added student Andrea Flores, president of the Harvard Undergraduate Council: “I can kind of see where they’re coming from in the sense that I don’t think Harvard is being very forward thinking, but I think that’s because we’re covering things that needed to be addressed in the past.”
Faust said it has been a challenge to keep people focused on the university’s strengths, from its commitment to financial aid for all students who need it to its ability to gather experts from multiple schools and disciplines to tackle large problems like global health or global warming.
“It’s a challenge in this environment to keep people’s eyes on the really important issues that give us all something to believe in,” she said. “I’m thinking a lot about that this summer.”
Regardless of how much anger bubbles on campus over layoffs, budget cuts and faculty reductions, Harvard Law School professor Alan Dershowitz said Faust also has a great deal of goodwill, which should help her weather the economic downturn. Goldfarb and Flores also expressed overall approval for her tenure thus far.
Once the crisis ends, Dershowitz said, Faust will be in position to push her own bold agenda.
“You have to give her time. … Everybody would be thrilled if we end up in a few years not worse than it is today,” she said. “Everyone wants Drew to succeed, everybody is rooting for her.”
BILLINGS, Mont. — Montana’s ultra-posh Yellowstone Club is in new hands, following a $115 million deal that the new owner hopes will close the door on the resort’s much publicized descent into bankruptcy.
Eight months ago, the millionaires-only club was on the verge of liquidation, a victim of its prior owners’ excesses and the broader economic downturn that choked off the flow of money fueling the club’s rise.
On Friday, CrossHarbor Capital Partners of Boston bought the 13,600-acre private ski resort about 50 miles south of Bozeman at what was considered a bargain-basement price.
The firm’s managing partner, Sam Byrne, had offered to buy the club last year for $470 million and had already invested more than $200 million in club real estate over the last several years.
Byrne acknowledged Friday the club’s once-sterling reputation will need some polishing.
“It’s going to take time to win back the trust of members and the community and re-establish the brand,” he said. “We’re confident that the place has a bright future.”
The resort was nearly pulled apart last year during the bitter and high-profile divorce of its founders, Edra and Tim Blixseth. Later came revelations that the pair had drained tens of millions of dollars from the resort, helping push it more than $400 million into debt.
The collapse was extraordinary for an enterprise that counts Microsoft Corp.’s Bill Gates and hotel magnate Barry Sternlicht as members.
Those who are allowed to join must buy real estate with price tags that can top $10 million, and pay a $300,000 deposit. The privacy members thought their money was buying was shattered when the club’s rolls were made public as part of its bankruptcy case.
With the Blixseths now out of the picture — and fighting each other over the remains of a personal fortune once estimated at $1.3 billion — members are looking to Byrne to get the club out of the headlines.
“There’s going to be a massive sigh of relief, a collective sigh of relief,” said Bill Curtis, a club member and the chief executive of CurtCo Media, which publishes the Robb Report, a magazine that caters to the wealthy.
Only about 300 of the club’s more than 800 available memberships have been filled since it opened in 2000. Just three properties changed hands during its months in bankruptcy.
Curtis said Friday’s deal will shake up the market for the club’s property, but he cautioned that the resort isn’t out of rough waters yet.
“If you ask me what the economy’s going to do, it’s going to continue to make it a challenge,” he said. “Nothing’s going to happen overnight.”
Byrne said more than $150 million on top of the purchase price has been pledged to pay for improvements at the resort.
That’s likely to include the club’s 120,000-square-foot centerpiece Warren Miller Lodge — left unfinished despite a reported $100 million investment.
Byrne also said he persuaded a large group of members to put money behind his plans to recapitalize the resort. He declined to offer specifics.
The club will continue to be managed by the Discovery Land Co., brought in last year when Edra Blixseth took over the operation following her divorce.
Tim Blixseth tried to scuttle the deal between his ex-wife and Byrne until the day the sale became final. He has claimed they colluded to drive the resort into a financial hole so Byrne could scoop it up on the cheap.
Those claims were repeatedly rejected by U.S. Bankruptcy Judge Ralph Kirscher in Butte, Mont., and on Thursday he denied Tim Blixseth’s latest effort to block the deal through a court-ordered stay.
In his opinion, Kirscher said the parties in the sale had acted in good faith. He said Tim Blixseth’s “generalized allegations of misconduct” were irrelevant.
He added that the case — which involved more than 100 lawyers and resulted in several spin-off lawsuits that are still being resolved — “was of a magnitude never seen before in this court.”
Eleven days ago, while Bernard Madoff was in a Manhattan jail cell awaiting his 150-year sentence, his old friend Carl Shapiro was enjoying a family dinner at the Four Seasons in Boston. He and his wife, Ruth, were celebrating their 70th wedding anniversary with their children and grandchildren at the luxury hotel, where they often dine.
The festive affair belied the uneasy times for the Shapiro family. Three days before attending the party, Shapiro son-in-law Robert Jaffe was accused by federal regulators of delivering $1 billion in client funds to Madoff, reaping $150 million in improper payments in return. Jaffe denies the charges.
Shapiro, who has lost at least $545 million to Madoff, is one of numerous large investors who are under investigation by US authorities.
And now, as a client who has known Madoff for five decades, Shapiro has to worry if the court-appointed trustee recovering funds for victims will try to seize any profits he or his charitable foundation received from him over the years, as the trustee has sought to do with other large clients.
“There’s a significant risk for people who had substantial accounts for many, many years, who were looking at the supposed performance regardless of what the market was doing and seeing gains year after year,’’ said Boston attorney Harry Miller, who represents a number of Madoff victims. “The trustee is going to take the position that they should have known, and could hold them responsible for that.’’
And if regulators determine he received unusually large returns over his many years with Madoff, the consequences could be tougher still.
Irving Picard, the Madoff bankruptcy trustee, is pursuing a number of large investors for “clawbacks,’’ or demands they return profits from Madoff because the money, in effect, belonged to other investors.
He is limited to the past six years of gains; the Securities and Exchange Commission has no time limit on how far back it can go to recover what it calls “ill-gotten gains.’’
Picard and the Shapiros have not commented on whether the family has received a clawback demand.
In some ways, life continues as usual for two of the men closest to the Wall Street swindler. They have returned from Palm Beach to the Boston area for the summer, as they typically do. There was the recent wedding of the Jaffes’ son Steven, and they recently attended the bar mitzvah of the child of some friends.
But in other ways, life is changing in ways big and small. Jaffe will not be a regular at the Pine Brook Country Club in Weston this season; he’s taken a year off from the golf club “for financial reasons,’’ his spokesman said.
Meanwhile, Shapiro, 96, has been pained to see a large part of his personal fortune wiped out, along with half of the charitable foundation that has donated in his family’s name to hospitals, art museums, and schools in Greater Boston and Palm Beach. He has said he was as shocked as anyone by the scandal.
The Shapiros have donated $196 million to the Carl and Ruth Shapiro Family Foundation over the past decade, according to the foundation’s tax records filed through 2007. More than half of that, $111.5 million, was donated in 2007.
The family uses another entity to sometimes direct contributions to the foundation: Wellesley Capital Management Inc., which accounted for $49 million of the donations during the 10-year period. The firm was established in 1975 to handle tax and accounting services for the family fortune and keeps the books for the foundation, according to tax records and state filings. It is also listed as a client on Madoff customer lists.
Through a spokesman, the Shapiros declined to say if the money they gave the foundation came from Madoff or other sources.
Last week, a Shapiro family confidant who asked to remain anonymous confirmed that both the US attorney in New York and the bankruptcy trustee are examining Shapiro’s investments with Madoff.
Wellesley Capital did not have oversight of Shapiro investments, said the family spokesman, Elliot Sloane, but is a “bookkeeping and accounting office serving the needs of the Shapiro family investments.’’ It has a small staff, and its officers are Shapiro’s three daughters: Linda Waintrup, listed as president; Rhonda Zinner, and Ellen Jaffe, Robert’s wife.
On Madoff’s customer list – flawed and error-ridden though it is – no entity is mentioned more times than Wellesley Capital Management. The firm, or the address and suite number of its office, appears 129 times, with clients that include Shapiro family trusts and two of the Jaffes’ sons.
Other investors with longtime relationships with Madoff also appear multiple times on the list: Jeffrey and Barbara Picower and their foundation, which Picard has alleged took billions more in money out of Madoff accounts than they put in, show up 10 times, and New York money manager Ezra Merkin, who funneled $2.4 billion in client money to Madoff, shows up eight times. Stanley Chais, the Beverly Hills money manager charged with fraud by the Securities and Exchange Commission, is listed 68 times.
One possible explanation for the large number of Shapiro family accounts on the client list is that Carl Shapiro’s relationship with Madoff dates back to the 1960s.
People who know Shapiro said he thought of Madoff as a son. In the days before the collapse of his scheme in December, Madoff asked Shapiro for $250 million, which his friend gave him. Shapiro learned of Madoff’s confession on the television news, say people who know him.
Known for an exacting attention to detail, Shapiro has kept a firm hand in the workings of his charity and his finances, according to people who know the family. He takes a personal interest in many of the nonprofits the foundation funds. He set up Wellesley Capital rather than hire an outside firm to manage his affairs. And for years he used a New York accounting firm run by a friend of Madoff’s to prepare the foundation’s taxes, which often were filed late.
The question many are asking is this: How could Shapiro or other Madoff investors have failed to see that something was amiss when they received returns that beat the market so consistently?
Miller said part of the answer lies in human nature. “If things were really good, you might look the other way and not look into what was going on,’’ he said.
It appears the Shapiros are cutting their Madoff ties one by one. The foundation has fired the accounting firm Konigsberg Wolf & Co., the family’s spokesman said.
Neither Shapiro nor Jaffe attended Madoff’s court appearances, nor did they submit character references to the judge who sentenced Madoff.
Its eye on sports, CBS pulls plug on legendary WBCN
By James Reed and Erin Ailworth, Globe Staff | July 15, 2009
It was more than 40 years ago, on a March night in 1968, when WBCN-FM (104.1) decided to break from its classical music format. Instead of Bach, listeners that evening heard “I Feel Free,’’ by the Eric Clapton-led rock band Cream, and right then Boston’s local music scene was transformed.
Yesterday, it was upended yet again, by the same station.
CBS Radio Boston, which owns WBCN, announced it would pull the plug on the station, which helped make household names of some of the biggest musical acts to come out of Boston, so it could accommodate other changes in local radio.
Next month, a sports talk radio station, The Sports Hub, will replace the music station WBMX, or Mix 98.5 FM, adding a third sports radio show in a town that seems to have an insatiable appetite for all things sports. Mix 98.5 will then take its “modern rock, conservative format’’ to WBCN’s slot.
And WBCN, whose slogan, “The Rock of Boston,’’ had become as seminal as some of the performers the station championed early on – including Aerosmith, The Cars, J. Geils Band, U2, and Elvis Costello – will morph into an online-only station available at wbcn.com.
New sports talk station will take on WEEI.
It was stunning news for generations of Boston music fans, who grew up with the station at a crucial time in rock music’s evolution, and for local bands, who had come to rely on WBCN as the one place that might land them their big break. WBCN came of age with some of rock’s pivotal figures, from Janis Joplin to Jimi Hendrix, and its disappearance from the dial is as much a signal of the changing musical scene as it is of drastically changed listening habits. (One word: iPod.)
“Once their ratings started going down the tubes, I thought to myself, ‘Somebody’s not getting it in corporate,’ ’’ Charles Laquidara, one of WBCN’s quintessential personalities from 1969 to 1996, said from his home in Hawaii. On his Facebook page, he addressed WBCN’s fans: “It was a great station. It was also a great time in radio history. I know we can never go back to that, but there will be something someday.’’
Mark Hannon, senior vice president and market manager of CBS Radio Boston, said in an interview yesterday it is a “sad moment to see a station with 40-plus years of heritage coming out of format.’’ But, he said, “the rock genre in this marketplace is extremely crowded, and ’BCN has struggled in the past few years to stay competitive.’’
The decision, which will take effect Aug. 13, will ripple well beyond the airwaves, too, given the station’s longtime support for local bands.
In addition to “Boston Emissions,’’ ’BCN’s two-hour, weekly program showcasing local talent, the WBCN Rock ’n’ Roll Rumble has been a popular battle of the local bands since 1979. Occasionally, its winners went on to find national success. After winning the Rumble in 1983, ’Til Tuesday, Aimee Mann’s new-wave band, was signed to Epic Records; the cabaret-punk duo the Dresden Dolls emerged victors in 2003.
Anngelle Wood, who organized this year’s Rumble, said yesterday she was not sure of the event’s future. “Boston Emissions,’’ which she also hosts, will move to sister station WZLX in August.
The longtime ’BCN personality who became known simply as Oedipus said the loss of the station will cut deeper than some might realize.
“WBCN was a fabric of the community,’’ he said. “It was part of Boston, like the Red Sox. It was more than just music. It completely enveloped the lifestyle of people in Boston and the Northeast. And it no longer does that. It had to make this change. It’s reflected in the ratings.’’
Word of ’BCN’s demise was greeted with mixed emotions at competing stations, where program directors, many of whom grew up listening to ’BCN, said they’d been expecting the downfall. A Cornerstone Research Inc. report looking at men ages 18 to 49 in metro Boston shows ’BCN ranking in the number 11, 12, and 13 spots from January to May, with roughly 4 percent of the area’s listening market.
“The general public must be very surprised, but industry insiders have known they had their problems – let’s just leave it at that – for a number of years. So, we’re not really stunned,’’ said Ron Valeri, program director at WAAF and Mike FM. Still, he said it’s “a bittersweet victory.’’
At 101.7 WFNX, program director Keith Dakin recalled the heyday of WBCN, when personalities like Laquidara and Mark Parenteau graced the station’s airwaves.
“It’s great for us. We’ve lost an alternative rock competitor,’’ said Dakin. “Don’t get me wrong. It’s sad to lose a legendary rock station in this market, but as far as the competitive landscape, it’s great for a station like ’FNX.’’
Parenteau, a DJ at WBCN for 20 years, beginning in 1978, said that before corporate ownership, the station encouraged its on-air talent to be outrageous and play what they wanted.
“We didn’t make a lot of money, but we had a lot of freedom. We could play jazz, comedy, whatever,’’ Parenteau said. “But as we made more money, we had less freedom. It was like a deal with the devil.’’
Still, the station was enormously influential.
“If ’BCN added a band, 30 or 40 stations would add that band because we seemingly knew what we were doing,’’ he said. “The sort of station ’BCN used to be is definitely dead. Radio today is all driven by boards of directors looking at the stock market. They want the sure thing, and they want to play it over and over.’’
Before he was lead singer in the J. Geils Band, Peter Wolf was one of the founding DJs at WBCN. He started there in 1968, interviewing the likes of Van Morrison, Jeff Beck, Sun Ra, and Roland Kirk. Wolf said he is neither surprised nor upset the station is going away. “For me, ’BCN ended a long time ago,’’ he said. “When it became corporatized, it lost the unique qualities that made it vital to the community.’’
Despite its founding in 1955 as a classical station, ’BCN became “the underground rock station in Boston,’’ said Scott Fybush, editor of NorthEast Radio Watch, an industry trade journal. “They were playing stuff that had no other home on the radio and people who had never had a reason to own an FM radio before were going out and buying an FM radio to hear this.’’
The station struggled for at least the last decade, propped up by its coverage of the Patriots and, at least for a time, Howard Stern’s syndicated show
Fybush called CBS Radio’s emphasis on building a sports station with Patriots coverage, a “smart move,’’ because it gives listeners something they can’t necessarily load onto their iPods – live coverage of games.
Of course, more sports and more talk means less rock for Boston listeners.
But Sean Ross, vice president of music and programming at Edison Media Research, said for many around Boston, that change had already begun.
“The ’BCN that most people are going to be sad about losing this afternoon,’’ Ross said, “went away a while ago.’’
Mark Shanahan and Don Aucoin of the Globe staff contributed reporting.
THE OBAMA administration’s plan to close the existing regulatory gap by using the Federal Reserve Bank as the main systemic-risk regulator is theoretically sound but a bad idea under existing Fed structure.
The Fed employs thousands of examiners stretching from Boston to San Francisco in an attempt to ensure a safe and sound banking system. They are the first line of defense in our banking system, ideally providing a financial firewall against excessive risk taking by physically inspecting banks and ensuring that adequate capital is available to support risk activities. Ratings provide a health scorecard and a comparison with peer institutions.
Although Fed examiners scored major banks such as Citigroup, Bank of America, and Wells Fargo, why didn’t they pick up on the bad banking behavior that President Obama characterized as “wild risk taking’’ on Wall Street? This trend should have been discovered, except that the Fed is adverse to change and its examiners are way behind the regulatory curve.
If the financial market was a gun fight, the Fed would be carrying pea shooters while the Wall Street structured-product gurus would be carrying AK-47s. The sophistication gap facing those charged with measuring and protecting our financial system is staggering.
Meantime, the corporate culture at the Fed has made examiners second-class citizens compared with the more glamorous monetary policy geeks and the economists who roam the marbled hallways. Of the 12 sitting Fed presidents, none came up through the ranks from examiner. Fed examiners continue to have a limited advancement track and salaries at least one-fifth less than those of the people who create the derivatives on Wall Street. How can the Fed attract the best and brightest this way?
The Obama plan would give more responsibility to the Fed at a time when it hasn’t earned it. The recent banking debacle makes clear the Fed has failed to demonstrate that it is capable of taking this added responsibility. Handing the Fed this new duty, given its recent track record, is the equivalent of giving your teenager a new car right after he wrecked the last one. This significant sophistication gap at the Fed, compared with market counterparts it is charged with regulating, is why the Fed didn’t detect the growing risk taking by the major banks. Examiners did not have the adequate training, skills, or tools needed to go head-to-head with the Wall Street rocket scientists.
Why, for example, didn’t the Fed examiners see the growing threat of derivatives? These financial products that got so many banks in trouble were first concocted in the financial laboratories of First Boston and Salomon Brothers back in 1983. The Fed should have had time to amass an understanding of how such derivatives worked, and what kind of financial damage they could cause if used in excess or for the wrong purpose.
But under its current charter, the Fed is not held accountable for a job poorly done. In response to the current banking debacle, there have been no penalties, demotions, firings, or even a public hearing on how and why the Fed dropped the ball. Moreover, when banks do fail (approximately 40 so far this year), it’s the FDIC, not the Fed, that must clean up the mess.
Before the Obama administration expands the Fed’s role and throws it the keys, it is important to fix the varsity-versus-jayvee vulnerability at the Fed. At minimum, this will require that more capital (human and financial) be committed to specialized hiring, training, and increased use of state-of-the-art risk-measurement tools (e.g., computer modeling). The goal is to improve the use of risk-focused exams and to create a skilled examination staff that can detect and halt wild risk taking before the company, market participants, and the economy are harmed.
In addition to the Fed being held more accountable, there must be implementation of performance-based incentives for a job well done. Equally, there needs to be clear consequences to the Fed for poor performance. Only after we plug this regulatory sophistication gap at the Fed can confidence in this agency be restored.
Mark T. Williams, a former Federal Reserve Bank examiner, teaches finance at the Boston University School of Management.
State Street Says SEC May Sue Over Bond Investments (Update4)
By Christopher Condon
June 29 (Bloomberg) — State Street Corp., the world’s largest asset manager for institutions, may be sued by federal regulators over bond funds that investors said lost money because of bets on risky mortgage-backed securities.
The company, based in Boston, said in a regulatory filing that it received a Wells notice stemming from a U.S. Securities and Exchange Commission investigation into disclosures and management of fixed-income investments through 2007.
The notification typically lets recipients respond to investigators’ claims before the agency’s five-member commission approves legal action. The SEC may decide not to pursue a case.
State Street, the manager of $1.4 trillion as of March 31, has been sued by investors claiming its funds took too much risk by investing in securities tied to home mortgages. The firm set aside $618 million in the fourth quarter of 2007 to settle legal claims stemming from losses linked to subprime home loans. It made $417 million of payouts as of Dec. 31.
“It’s not a long-term negative, but it could affect near- term earnings if they have to pay civil penalties,” Gerard Cassidy, an analyst at RBC Capital Markets in Portland, Maine, said in an interview.
State Street said in the SEC filing that it’s cooperating with the agency and with related probes by securities regulators and the attorney general in Massachusetts. Arlene Roberts, a spokeswoman for State Street, and John Heine, a spokesman for the SEC in Washington, declined to comment.
The company rose 18 cents to $48.50 at 4:15 p.m. in New York Stock Exchange composite trading. It has gained 23 percent this year, compared with the 13 percent rise for the Standard & Poor’s index for asset managers and custody banks.
Prudential Lawsuit
Prudential Financial Inc., the second-largest U.S. life insurer, sued State Street in October 2007 on behalf of 200 retirement plans for $80 million, the amount lost in two bond funds that were designed to closely track benchmarks. About 28,000 retirement accounts were affected.
The suit, filed in federal court in Manhattan under the federal Employee Retirement Income Security Act, alleged State Street changed the investment strategies of the funds and made “undisclosed, highly leveraged investments in mortgage- related” assets.
State Street lost a bid to have the case thrown out in September. U.S. District Judge Richard Holwell rejected the company’s claim that investors haven’t been injured because Prudential reimbursed them.
Robert DeFillippo, a spokesman for Prudential, declined to comment on the SEC’s action.
Galvin Probe
Secretary of the Commonwealth William F. Galvin, the top securities regulator in Massachusetts, said in April his office was investigating State Street for allegedly misleading pension funds over the risks of their investments.
Evergreen Investments agreed this month to pay $40 million to settle claims by the SEC that it overstated the performance of its Ultra Short Opportunities Fund from February 2007 to its closing in June 2008. When values were changed, investors were informed selectively, the agency said. The fund has been liquidated. Boston-based Evergreen was acquired by Wells Fargo & Co. in its takeover of Wachovia Corp.
OppenheimerFunds, a unit of Springfield, Massachusetts- based Massachusetts Mutual Life Insurance Co., was sued this month by investors seeking to recoup losses allegedly caused by mismanagement of the Oppenheimer Pennsylvania Municipal Fund.
The SEC has opened more than 50 inquiries and brought at least 10 cases linked to subprime loans since rising defaults triggered the global credit crisis in 2007.
Music network startup OurStage tunes in $3M funding
If you had a wager on which startups could put together venture cash right now, you probably wouldn’t pick an online social community for pop bands and their fans.
Our Stage
In the case of OurStage Inc., you’d lose that bet. The Chelmsford-based startup, launched in 2006, has raised $3 million of a $6 million new round of financing, bringing its total financing up to $20 million, company officials report.
In March 2008, OurStage raised $17 million from a syndicate of over 100 individual angel investors, assembled through Signature Capital LLC, an investment firm with operations in Florida and Portland, Maine.
Last December, the company went back to angels looking for additional funds.
“In the November-December-January time frame everything was dark for everybody,” said CEO and founder Ben Campbell. “We were in a phase where we needed to raise money and no one was opening their pocketbooks.”
But in early 2009, the company won sponsorship deals with MTV, Citadel Radio and RadioOne. Since then, it has closed five or six deals with household-name companies, which it plans to announce later this year, Campbell said. Add that to the fact that since its early days, it has slashed its burn rate neary by two thirds – to about $700,000 per quarter, and the company was able to get enough volume of small players to see it through, he said.
The site is on track to reach profitability by the middle of 2010, he said.
Such sponsorships net OurStage costs per thousand impressions (CPMs) in the range of $10, while standard ad serving yields $3.50 to $4, Campbell said.
A secondary source reaps subscription fees from booking agents, who use the site like a professional job search tool, tracking band rankings in various geographies to scout acts for their venues.
That’s similar to what a company called Sonicbids Inc. has been doing for some time, said Stephanie Kellar, an assistant professor of music business management at Berklee College of Music.
“Sonicbids were the first folks ever to come up with the electronic press kit. Their whole deal is to connect bands with venues,” Kellar said. “OurStage takes that a step farther adding the social media.”
A third revenue stream, now in beta mode, would allow paid subscribers to test the popularity of certain songs in specific demographics. Labels could do this before signing a band to a recording contract — and advertisers could use the service before committing to a song for a commercial, Campbell said.
That’s a compelling case for labels, who not only suffer from poor CD sales but have seen their hit rates drop dramatically, he said.
Kellar said major labels have been slow to embrace customer-centric marketing – and that’s been to the advantage of smaller, more nimble independent music producers.
“Some people are really reticent about change,” Kellar said. “If you’re not ready to push that envelope, then your competitors will start chomping at your market share. And that’s what happened to the major labels.”
Every now and again, a PR meme appears on the Web – almost to the point where you could set your watch by it. This time around, Claire Cain Miller of the New York Times sparked the conversation with an in-depth article, “Spinning the Web: P.R. in Silicon Valley.”
I respect Claire and I believe she wrote an extensive article that chronicles the launch of one particular startup and also featured supporting quotes from those PR professionals who are helping to usher in a new breed of corporate communications.
While an exposé makes for an interesting read, PR is undergoing a much more significant renaissance that receives almost zero attention in this article. P.R. in Silicon Valley is far more sophisticated and effective than what’s actually spotlighted in the story and it’s much more potent than most entrepreneurs, investors, and executives realize.
For those truly seeking answers and guidance in regards to the new landscape of PR and influence, please consider my new book with Deirdre Breakenridge, “Putting the Public Back in Public Relations.” There’s a reason we spent an entire year writing it. Anyone practicing communications, marketing, public relations, advertising, branding, or making sales and marketing decisions on behalf of any company would be remiss not to have read and shared this book. It is the most comprehensive, accurate, and practical resource on the subject of PR 2.0 and how the Social Web has transformed the world of communications, word of mouth, and authority. And, it will be relevant and poignant for years to come.
I met with Claire a few weeks ago while she was working on this article and to be honest, the elements that surfaced in our conversation offered far more value, insight and direction for both PR practitioners as well as company executives seeking to rise above the noise in traditional and social media. Perhaps it’s merely shelved for a future article, but unfortunately, now’s the time to place the focus on what works, what’s changing, and how to contribute to the (r)evolution instead of simply talking around it. As my quote in the New York Times alludes, PR is much more than what most think it is. While it’s clever, even the headline of the NY Times article suggests “spin” in the era of the Web. But as my book highlights and as discussed with Claire, what’s going on right now, is so much more important than what PR used to be – even though it’s still practiced today. This is about putting the public back in Public Relations, nothing less, nothing more.
In response to dissatisfied clients and huge shifts in the media landscape, a new breed of publicist is emerging, says Brian D. Solis, a P.R. guy who writes a blog called PR 2.0. His firm, FutureWorks, has a broad definition of “writer,” a category that includes those in mainstream media as well as the tens of thousands of bloggers and Twitter users who have developed avid followings by writing about niche topics.
“Mommy bloggers are the new TechCrunch; they’re such an influential crowd,” Mr. Solis says. Actually, what I said was that Mommy Bloggers are becoming as important to brands as TechCrunch is to tech companies.
Instead of calculating the impressions an article gets by estimating a publication’s circulation and pass-along rate, Mr. Solis counts the number of people who tweeted about a company and their combined following, the number of retweets or clicks on links, as well as traffic from Facebook and other social networks.
Picture this…the few paragraphs above are merely a snapshot that represent only a few minutes from a fascinating dialogue that spanned over the course of one-and-a-half-hours.
As the New York Times article leads you to believe, everything in PR focuses on the launch or a news event, however, the launch vehicles, mouthpieces and corresponding opportunities have changed and extended thanks to the socialization of media. But what hasn’t changed is the process of connecting information to people seeking it, when, where, and how they ask questions, learn, and communicate. The only difference is that the tools and the people involved in the decision making process have augmented. Therefore, we as “experts” must compensate for rapid evolution and first determine where we need to be today, tomorrow, and next month, and then reverse engineer the processes, languages, and channels of influence in order to effectively reach influencers, peers, customers, where, when, and how connect – tapping into individual instances where they seek information, offer advice, and share the things that move them.
We must become the very people we’re trying to reach…
Herein lies the problem with P.R. It is at the very least, misunderstood, under estimated, misused, and most importantly, under appreciated. And, the article only perpetuates the notion that PR is an instrument for pushing “news” when what we’re actually purporting now, is the reality that PR offers so much more.
P.R. does not stand for press release, yet it is only valued or consulted when news is imminent. Therefore, the press release has become the “go to” tool for telling company stories when it has something say.
P.R. is not spin. The difference between PR of yesteryear and Public Relations of today and tomorrow is our ability to understand the pains and challenges of our customers and connect our value proposition to those specifically looking for it, where they’re looking for it. Our job is not deceive or mislead stakeholders. Our job is to establish an interactive channel where we share and learn, directly participating within the markets that define our business. And, we not only engage, but we also listen to and absorb feedback in order to have a meaningful impact internally that ultimately engenders a more customer-focused organization that’s in tune with the needs of valuable users.
P.R. is not publicity. The idea that news is the focal point of P.R. is shortsighted and the notion that we’re purely publicists is insulting. There’s a difference between getting people to write about your company or product and building a market around it. In the era of socialized media, you should concentrate on the latter. Please note, there’s a stark contrast between the role and associated qualifications and experience of a publicist and someone in Public Relations. You may need both, but they’re rarely one in the same…and that’s the point of this post.
P.R. stands for Public Relations and therefore begets relationships with the greater communities of influencers and users who can help extend the story, intentions, value, and sentiment as a means of driving awareness, building communities, and empowering advocates over time.
The type of PR described in the New York Times assumes a standard launch strategy tied to a one-time event supported by the tactics of distributing the official press release or related information. In this case, only the players involved and the channels they use represent the recognition and incorporation of new media influence. However, the goals were similar to that of traditional publicity. Create a big launch. Generate a ton of visibility. Drive traffic. Spark word of mouth.
The only problem is that activity always diminishes if communications doesn’t shift into the next gear to extend visibility and interaction.
The true value of new Public Relations is to do all of these things, but also build communities of power users who will extend the story across multiple networks in order to reduce the delta between the spike of launch activity and the valley below once traffic subsides.
This is Public Relations and the foundation for a new era of direct to consumer (D2C) influence – one where WE become influential in the process of creating visibility and also supporting activity. It’s now our job to build and grow communities and therefore we can no longer hide behind the brands we represent.
If you’ve studied the behavior and ensuing results associated with retweeting and linkbacks lately, you’d be surprised to learn just how few people actually click through to interact with the shared content, let alone using or referring the product or service contained in the link – no matter how influential you are. Of course, the more authority and trust you possess, the more retweets and shares you earn, but the follow-through never fails to dissipate without fuel and cultivation. This observation is shared in a recent launch comparison by Michael Arrington on TechCrunch.
The point is that if we base our activity on news and events, the results will always produce spikes and valleys and the distance between them is determined by the cadence of our news releases and the effectiveness in how well we generate presence and corresponding traffic. Unfortunately as the attention of our customers continues to thin and the competition for awareness escalates, the distance between the spikes and valleys may be the difference between success and obsolescence.
The trick is how to counter the balance and disparity between apex and and nadir.
The answer is to create programs that match the results from the initial research of identifying the people and channels of influence within every facet of the customer bell curve – from the head to the Long Tail.
I call this a “Yo Yo on an Escalator,” as your traffic can go up and down, but through a dedicated practice of community, awareness, and advocacy programs, the cumulative traffic is always going up – especially in between news cycles.
It’s the difference between a campaign mindset and one of community cultivation.
Every launch or news strategy should be supported by an ongoing program of community building and influencer engagement from the a-list all the way to the Magic Middle (the group of people who reach and impact peers of potential and existing customers and decision makers through blogs, twitter and other social networks). Now, if you re-read my quote from the NYT again, it starts to make more sense…
Extending the value proposition within multiple horizontal and vertical markets is not only beneficial, but critical for any company hoping to compete for the future. The belief that there is only one market and one channel and one opportunity for your story is not only confining, but also dangerous.
As I said in the NY Times article, we’re striving to reach and compel “a category that includes those in mainstream media as well as the tens of thousands of bloggers and Twitter users who have developed avid followings by writing about niche topics.”
Again, there is no one market for our one message. Our value propositions must speak to those influencers and decision makers looking for information that speaks specifically to them, understanding not only what galvanizes action but also pays homage to their unique needs and experiences.
These individuals represent the landscape of traditional and new media authorities that occupy mainstream and niche markets and form a pyramid stacked on varying degrees of leverage.
It’s our responsibility to identify and prioritize all important categories equally in order to run both a top-down and bottom-up communications program that increases visibility, demonstrates awareness and empathy, offers solutions, and inspires champions who can help us extend and scale explicit benefits for particular groups of consumers. In doing so, we can create a series of concentric circles that, when nurtured individually, resonate and extend until they collectively overlap and form a topography of collaborative, burgeoning and overlapping conversations and communities that extend the reach of companies to cultivate dedicated channels.
In the end, relationships and expertise serve as the currency of PR and influence and without them, the ability to connect stories, earn trust, empower advocates, and build vibrant communities is implausible.
The eligibility to earn these relationships however, start with a completely new and enlightened state of market awareness, customer empathy, and social adeptness, bound by passion and a clear proficiency in the art and science of influence and community building.
In the new world of communications, PR stands for Public Relations. – again
Boston magazine hoping change at top will bring lift
By Megan Woolhouse, Globe Staff
Boston Magazine - Financial Challenge
Larry Platt, the top editor of Boston magazine, is from Philadelphia and it shows. During a breakfast interview last week, his description of an upcoming story about recently indicted former House speaker Salvatore F. DiMasi hit a pronunciation snag. “Is it Di-May-si or Di-Mah-si?’’ he asked with a hint of uncharacteristic bashfulness.
Platt – who is also editor of Philadelphia magazine, both owned by Philadelphia-based Metrocorp Inc. – is unfamiliar with the scene in the Massachusetts capital and unapologetic about it. But he intends to make Boston magazine a “must read’’ that “gets the movers and shakers in Boston shaking.’’
In the process, he also hopes to halt a sales slump that has caused the glossy monthly to lose money this year for the first time in its nearly 40-year history.
“I think an outsider can bring fresh perspective that can challenge the parochialism,’’ Platt said.
But the Philadelphia native, who became editorial director of both magazines in February, faces a daunting challenge.
Like magazines nationwide, Boston is struggling because of the recession and the migration of readers to online publications. Overall circulation has dropped 24 percent since 2005 to about 100,000. Newsstand sales – driven by customers who make an impulsive decision to pay full price – are off 35 percent since 1999, according to Metrocorp, which is privately held.
The magazine is noticeably lighter because of fewer advertisements and thinner content: The May issue was 152 pages, down from 282 last year.
In addition, city and regional magazines like Boston have faced increased competition from a flurry of niche products. In recent years, The Improper Bostonian has grown into a slick biweekly angling to be the city’s “premier entertainment and lifestyle guide.’’ Boston Common, as well as specialty publications like FB, Lola, and Design New England – all three published by Boston Globe Media – also target a high-end demographic.
Last month, Platt made his first major moves by firing four staffers, including editor James Burnett. Platt replaced him with Andrew Putz of Minnesota Monthly, who will start July 22 and report to Platt.
The move stunned surviving staffers, who had just started assembling the annual “Best of Boston’’ issue.
“The biggest shock was the timing,’’ said Jolyon Helterman, the features editor who resigned in protest the same day. Helterman, 39, said the firings showed a lack of confidence in the content and unfairly condemned the staff for the magazine’s financial woes.
It was as though they were saying “editorial is broken,’’ Helterman said, when the real problem is “people aren’t buying ads because no one has any money.’’
Platt said economics made the layoffs necessary. As for the decision to cut jobs now, he said, “There is no good time to do this kind of thing. The longer you wait, the more of an economic hole you dig yourself into.’’
Samir Husni, director of the Magazine Innovation Center at the University of Mississippi in Oxford, said profits at city and regional magazines nationwide have dropped, causing them to cut employees and pages. Their lifeblood – ads for luxury services, restaurants, and jewelry stores – has dried up.
“When the economic collapse happened, it took the entire business model with it,’’ Husni said. “So everybody is trying to reinvent’’ themselves. For example, he said, some are charging more for subscriptions to offset losses in ad revenue.
Mark Jurkowitz, the Globe’s former media critic, now an associate editor at the nonprofit Project for Excellence in Journalism in Washington, D.C., said industry changes and the dour economy mean Boston will have a “rough go’’ this year. But masthead churn at the monthly is nothing new, he said.
“Philadelphia magazine was always seen as the star’’ by Metrocorp, said Jurkowitz, who had a brief stint at Boston. “Philly was always the big brother.’’
Stories about turmoil at Boston magazine almost always invoke the name of its owner, D. Herbert Lipson, who is a looming presence on the Philadelphia scene, and well known for trumpeting his conservative politics. Even at 80 years old, Lipson remains in charge of Metrocorp and does not hesitate to voice his opinion about the magazines.
He bought Boston magazine in 1970 from the Boston Chamber of Commerce, which produced it, sparking controversy from the start. Chamber members wanted to buy it themselves, so when Lipson outbid them, they promptly walked out.
Lipson, whose father purchased Greater Philadelphia Magazine from that city’s Chamber of Commerce in 1951, was hardly deterred by the exodus.
“We put together the magazine with spit and chewing gum,’’ he said in the 1987 anniversary issue of Boston. “Our first efforts were remote, with Philadelphia involved, and that led to some bad editorial choices. I wanted to address social issues, literary issues, and it took us a while to get on track.’’
Lipson, who writes a monthly “Off the Cuff’’ column for Philadelphia, lives outside Atlantic City, and has a few thin ties to Massachusetts: He spent his childhood summers on the North Shore and his father came from Worcester. Lipson declined to be interviewed for this report, but in Philadelphia magazine last year he talked about what inspired his publishing career five-plus decades ago.
“There was nothing worse than being ignored,’’ he said. “We were driven.’’
Over the years, Boston has published a wide range of stories, from an article on the 1970s busing crisis to a recent cover piece on Red Sox owner John Henry’s engagement, as told by a friend of the bride. But its staples include features on pricey restaurants, fashion boutiques, and luxury real estate. The magazine also pioneered the “best and worst’’ model, eventually dropping the “worst’’ in what was viewed as a concession to advertisers.
Both Metrocorp magazines, and several ancillary publications, have won a host of awards over the years and generated a steady stream of advertising dollars, making Lipson wealthy. At a company Christmas party five years ago at the Charles Hotel, Lipson proclaimed he was “backstroking in green,’’ according to someone who was there.
David Rosenbaum, editor of Boston from 1986 to 1991, said Lipson did not care much for editors, but tolerated them when profits were robust. “When the economy turns and it [the magazine] gets skinny, he figures the editor is an idiot,’’ he said.
And they often paid a price: A dozen editors came and went between 1975 and 2000.
Rosenbaum said Lipson frequently pushed him to be irreverent, “going after poor people, Democrats, the handicapped, minorities,’’ he said. “He’s to the right of Attila the Hun. At least he was. I haven’t spoken to him since the day he fired me.’’
John Wolfson, a former senior editor who left Boston last year, said he often cringed when Lipson spoke, but that his advice was sought after in industry circles. “Lipson’s a tough customer,’’ Wolfson said. “But he knows what he wants and puts out a good magazine.’’
Metrocorp’s 2009 revenues have fallen 10 percent to 15 percent from last year, according to David Lipson Jr., president of Metrocorp and Herb Lipson’s son.
Platt said he has a plan for reinvigorating Boston magazine: There are 250 influential people who compose any city’s power structure, he said, and the key is to write vivid stories about them. But sorting out the city and its workings might be tougher for Platt now that some staffers with deep local roots are gone, and his editor, Putz, is from Minnesota.
Marketing director Dawn Curtis Hanley, daughter of Boston newscasters Chet Curtis and Natalie Jacobson, was among those fired. So was Rockport resident and creative director Patrick Mitchell. And former publisher Dan Scully, a Boston native, retired last year after 24 years.
“I still have a few people I care about there, so I’d like to see the whole thing succeed for their benefit,’’ Scully said. “I wish them the best with these changes.’’
Burnett, the latest editor to be dumped, said his severance agreement prevents him from saying much publicly about his tenure. “I understood going in that the editor of Boston magazine could have a limited shelf life,’’ he said. “But what I tried to do is not let that inhibit us.’’
Platt began courting Putz, 35, about two months ago. Putz wrote “buzzworthy’’ stories for Minnesota Monthly, Platt said, including pieces on Al Franken’s senatorial bid and the massive I-35W bridge collapse. While city and regional magazine sales dropped 14 percent nationally in the last year, Minnesota Monthly’s sales grew 3 percent under Putz, according to Platt.
Putz acknowledged Boston editors often have a short tenure. “I’m going to be there as long Larry Platt and Herb Lipson want me,’’ he said.
Jim Bandera, a former sales director at Boston magazine who left the company last fall, said Putz will probably bring a fresh sensibility to the job and hire writers who understand Boston.
Putz said it is too early to say what changes he will make at the magazine. “I’m not going to pretend to have some knowledge that I don’t have,’’ he said. “I’m like a well-informed tourist.’’
Johnny Diaz of the Globe staff contributed to this report. Megan Woolhouse can be reached at mwoolhouse@globe.com.
Lots of car companies claim to build dream cars. Nearly every luxury and exotic car manufacturer has a department for special orders, and there’s no shortage of tuners that turn these cars inside-out, but aside from Louis Vuitton seats and stainless steel hoods, there’s not much original thought involved. Chinese brand BYD has the lofty phrase “Build Your Dreams” in its name, but its creations are nightmares. Even Tesla Motors can’t climb its way out of a Lotus Elise.
Local Motors of Wareham, Mass., is building bespoke automobiles the old-fashioned way: take a sketch, bring the buyer into the shop at every step, and churn out a car that resembles no other set of wheels on earth. The company’s website even invites designers to compete and submit drawings for potential production.
It’s certainly courageous of CEO John B. Rogers, Jr. – a retired Marine and Harvard Business School grad – to gather millions of dollars and pay 10 employees in these times. Give this man a nice federal loan – he’d deserve it.
A sketch of the final version of the Rally Fighter, center, is surrounded by previous mock-ups.
John Rogers, Jr., CEO of Local Motors Inc, sits in a mock-up of the Rally Fighter on the floor of his garage.
John Rogers, Jr. in the midst of the ribs of the Rally Fighter mock-up.
Colby Whipple uses a hand held 3D scanner to scan a Ford axle that they will use in the Rally Fighter. Once scanned, it will be used in the computer so they can test various performance capabilities.
Spirits of Cape Ann – Ryan & Wood Inc. – Beauport Vodka Launch
Ryan & Wood Distillery Gloucester MA – Beauport Vodka
Gloucester distillery brings craft approach to alcoholic beverages
By Joel Brown, Globe Correspondent | July 2, 2009
GLOUCESTER – Beauport, Knockabout, Folly Cove. The names have historic meaning on Cape Ann.
Beauport – “good harbor’’ in French – was an early, poetic name for Gloucester. A knockabout was a type of fishing boat without a bowsprit, designed in Essex. Folly Cove is an inlet on the Rockport shore that lends itself to navigational errors and, by some accounts, rum-running during Prohibition.
But the names are about to get new meanings. As in, “I’d like a Beauport Martini, please.’’ “Pour me a Knockabout and tonic.’’ “Can you make a Folly Cove and cranberry?’’
In a bland industrial park just off a Route 128 rotary, Bob Ryan and his nephew Dave Wood are running what they believe is the first still in Gloucester – the first legal one, anyway – since the start of Prohibition in 1919. Their hand-crafted, premium-priced Beauport Vodka is hitting the shelves of a few Cape Ann package stores and bars. Knockabout Gin and Folly Cove Rum will follow in coming weeks, and wider distribution is planned.
“You don’t want to ramp up and burst on the scene too large and have a pipeline you can’t fill,’’ Ryan said. “You want to take advantage of being a bit exclusive, something that people want to have, maybe the rare baseball card of the industry type of attitude, and be sure that you put out what you want to put out.’’
From the front, Ryan & Wood Inc. Distilleries headquarters looks like a regular strip-mall office. But the building drops down a slope at its rear, creating a warehouse-like space three stories high. It’s there that the two men and still operator Jim Cook work amid pallets of grain and other raw materials, tanks of vodka and barrels of rum and whiskey spirits stacked to the ceiling.
The centerpiece of their efforts is the 152-gallon alembic pot still, a wonderful contraption out of Jules Verne or “Willy Wonka,’’ with a giant hammered-brass pot and “helmet’’ beside two 17-foot towers dotted with portholes, all connected with pipes and tubes. Made in Germany and heated by steam, the still was a $90,000 investment.
Inside it, American barley, wheat, and rye are the raw materials for a carefully monitored double distillation that delivers an eye-watering 95-percent-alcohol spirit that will then be diluted with local spring water down to 80-proof (40 percent alcohol) vodka. The gin is made much like the vodka, but with the addition of botanicals, including dried citrus peel that gives it a bright, summery taste. There’s also an all-rye whiskey in the works. The rum starts as molasses instead of grain.
“We get a lot of people come in and ask if there’s anything local. I think the Gloucester people will try it, and he has a good product,’’ said Louis Linquata, who owns Seabreeze Liquors and Railroad Avenue Liquors in Gloucester, where he’ll stock Ryan & Wood products.
It’s an interesting project for the 56-year-old Ryan, who worked as a commercial banker in town, and the 37-year-old Wood, a real estate lawyer in Beverly.
“I have been accused of this being my red convertible at age 50,’’ Ryan said, his smile showing no signs of midlife crisis. “It’s an adventure.’’
For Ryan and Wood it’s also about crafting a product they are proud of and staying connected to their roots. Before selling their first bottle, Ryan was honored earlier this month as the 2009 small-business person of the year in Manchester by the Cape Ann Chamber of Commerce.
“I can’t imagine doing it with anyone else,’’ said Wood. “He wants to make his mark on history with this, and I think he will. To be part of that is a heck of a lot more gratifying than making junior partner at Hale & Dorr, if that’s the analog to the distilling business. It’s the reason for getting out of bed. Otherwise, looking at a future of closing loans, it’d just be a little more bleak, I guess.’’
Bob Ryan and his nephew, Dave Wood, have launched the new Ryan & Wood micro-distillery in Gloucester.
They’re using the copper Arnold Holstein still above to make designer vodka and rum.
By IAN HURLEY
By Barbara Taormina
GateHouse News Service
Fri Dec 14, 2007, 11:38 AM EST
Hannah Jumper knew how to work a crowd.
On the morning of July 8, 1856, she rallied 200 wives and mothers and convinced them to follow her on a town-wide raid of all the rum in Rockport.
Legend has it that the women met in Dock Square with little hatchets hidden in their lace shawls. After a short speech from Jumper, a 31-year-old redheaded seamstress with some Oprah-style star power, the crowd began patrolling the streets smashing every cask and jug they could find. Five hours later, after every drop of known liquor had been spilled, the women went home to cook dinner.
Jumpergate is interesting for a couple of reasons. The Rockport rum dealers took the women to court but a judge ruled the crowd had a right to take action against a public nuisance. Who knows what effect that legal decision had on families with barking dogs, loud kids and over-the-top lawn ornaments.
But it’s also kind of interesting to imagine what Jumper would do today if she happened to wander over to Gloucester’s Blackburn Industrial Park, where the first licensed microdistillery in eastern Massachusetts is cooking up its first batch of premium vodka. Bob Ryan and his nephew, Dave Wood, are tending a big-bellied copper still imported from Germany that looks like something right out of Wonka’s chocolate factory. Even Hannah might be impressed.
Ryan and Wood are blazing the way with the latest trend aimed at satisfying our love for gourmet and our reverence for all things local and, of course, our fondness for top-shelf liquor. There are about 100 microdistilleries now up and running across the country. A lot of them have sprung up in the Midwest, where farmers with long family histories of moonshining have plenty of grains and fruits to spare.
But there’s also a good number of guys like Ryan and Wood who have set up small designer distilleries as a second career because it’s interesting, profitable and, probably most important of all, because it’s fun.
“We’ve run through the microbrewing trend, and this is kind of a natural progression of that,” says Wood, a lawyer by day and a state-of–the-art moonshiner by night. “People want a locally produced artisan product made with local ingredients and with attention to quality.”
Ryan figures the market for locally produced sprits is an extension of the Martha Stewart phenomena that has triggered a popular appreciation of quality and attention to detail in all things culinary and domestic.
“And, this is a little bit of ego, but we think Gloucester deserves us,” says Ryan with a smile.
Beauport Vodka, the first batch of spirits created by Ryan and Wood Distilleries, is ready to go. All they are waiting on now is the bottles, which will be hand-filled and corked — probably by someone in Ryan’s enormous extended family.
Beauport Vodka should hit store shelves in January. Next up will be Folly Cove Rum, which Ryan and Wood hope to begin selling sometime next summer. But that’s just the beginning. There are all sorts of ingredients to tinker with, endless combinations of flavors to try. And all sorts of niche markets to tap.
Ryan and Wood are riding the edge of a potentially big shift in the liquor industry, and the edge is often an excellent place to be. Not only could they end up changing what people drink on the North Shore, they may end up changing some of our perceptions about spirits and how we drink them. And that could be some good news for all of us — even Hannah Jumper.
Starting up
Owning and operating a mircodistillery isn’t for everyone. You’ve got to have a lot of time and patience. Having some community good will and a small pile of startup cash also doesn’t hurt.
Ryan has all of that. A lot of people in Gloucester know him from his years on Gloucester’s waterfront running Atlantic Seafood, before declining fish stocks and government regulation forced the fleet and the shore-side fish dealers to do some dramatic downsizing. Other people know him for the role he played in launching Gloucester Bank and Trust. Between Gloucester and his adopted hometown of Manchester, there probably isn’t a volunteer board or commission he hasn’t served on.
After Ryan left the waterfront, he spent some time taking care of his aging parents and helping with community projects, but it wasn’t quite enough.
“I felt maybe I was getting a little too old too quickly,” he says. That changed when Wood happened to mention a story he read about a microdistillery in Vermont. They talked it over and decided, why not us?
They traveled up to Freeport to visit an operation called Maine Distilleries that’s bottling Cold Water Vodka. Sure, there was a side trip to the LL Bean outlet, where Ryan’s wife Kathy picked up lots of new sweaters and fleece, but they liked what they saw at Maine Distilleries and decided to learn more.
They flew out to Flagstaff, Ariz. for a workshop where they learned the ins and out of the microdistillery business — the history of spirits, the secrets of fermentation and the art of distilling.
“I don’t think we knew what we were getting into,” says Kathy Ryan, referring to the equipment, workspace and the long and grueling licensing process. “But after the workshop I was glad Bob found something he was excited about.”
It took about 18 months to get through the paperwork for a state and federal license. There was even a lengthy approval process for the label — it has to include the surgeon general’s warning and you can’t use the American flag or make any claims about health benefits.
But the legwork is done and now, on the ground floor of the meticulous Ryan and Wood Distilleries plant, the enormous shiny copper-pot still is churning and slowly drawing every last drop of alcohol out of carefully fermented batches of mash.
Ryan says people usually have the same reaction when they see the still. It’s an oohh and ahh chorus, a lot like you hear at Fourth of July fireworks. “It’s a piece of old-world style technology right here in Gloucester,” he says.
Wood likes to do the tours. He’ll take you around to several stainless steel vats and explain the chemical process taking place inside each container. He’ll tell you about yeast and enzymes and show all the gauges and tubes and a four-spout hand-operated bottling machine.
There are big sacks of grain in one corner of the plant and in the other corner large wooden barrels, some of which were picked up from the Jack Daniels Distillery, where they were used to store bourbon. Wood says recycling those barrels gives fresh batches of spirits a slightly different taste.
Ryan jumps in with details about the still and all the help the business has gotten along the way from organizations like the American Distillers, local microbrewers and people who stopped by to wish them well. And both guys will talk history and the role liquor plays in American culture.
“This is the second oldest profession,” says Ryan, who adds that throughout history brewers and distillers have all met the need of a particular time and place. “Every farmer and every pioneer had a still,” he says.
And a lot of working families who grew up in cities and towns also tried their hand at distilling. Ryan and Wood say the most common thing they hear from visitors is that their parents or grandparents made small jugs of homemade hooch.
Still, they know there have been plenty of Hannah Jumpers who have long been blaming the product instead of the consumer for a list of troubles that fit under the heading of alcohol abuse.
“People are just getting out of the interruption of Prohibition,” says Ryan. “We’re going to try to fight that and the stigma of spirits.”
A new still in town
While Ryan and Wood hope to be distributing their products throughout eastern Massachusetts, they want to do more than fill and ship orders. They would like to make the distillery a tourist spot where visitors can come in and see the whole process — grains to spirits.
One possibility Ryan has been chewing over is the idea of linking up with Gloucester’s new cruise ship port that will bring thousands of overseas visitors to Gloucester and the North Shore. If those tourists stop by the distillery for a tour and they happen to pick up a bottle of locally distilled spirits as a souvenir, everyone’s happy.
Ryan and Wood have also reached out in other directions. They recently hosted a distilling workshop run by Bavarian Brewers and Distillers, the company that sold them their still. More than 30 people signed up to learn the craft and possibly follow in Ryan and Wood’s footsteps. And that’s fine with them. Camaraderie seems to be big among small brewers and distillers.
In addition to that, Ryan’s soon to be son-in-law Mark Mancini, a Bentley College student who is finishing up a degree in economics and finance, arranged for the start-up distillery to be a student project. Ryan and Wood opened the plant up to 160 students who got lessons in distilling and then came up with business plans on how to put Beauport Vodka on the map.
“We got a huge benefit from that,” says Ryan. The students did focus groups, devised marketing strategies and critiqued how the distillery was running so far. And they apparently all had a good time doing it.
And that was particularly satisfying to Ryan and Wood, who genuinely enjoy sharing everything they’ve learned. They want everyone to get in on the fun — tourists, the business community, but most of all friends and family.
Ryan’s son, Doug, is graduating this spring from Fordham University in New York and is considering applying to law school somewhere in Boston. The thinking is maybe he can work in the distillery while he earns his law degree.
Ryan likes that idea and he especially likes what his new business has done for his image with his kids.
“My son moved out of the house four years ago to go to college and all of sudden he’s back saying, ‘Hey, my dad’s cool,’” he says with a laugh.
Bottom line
As romantic as it may be to run a funky German-made still in a small plant in a corner of Gloucester, the big question ahead for Ryan and Wood is, will their products sell? Will there be a big enough demand for handcrafted spirits to keep the distillery going?
Ryan and Wood are both pretty confident sales will be good, and they’re not the only ones who are predicting success. Lenny Linquata also thinks Ryan and Wood are on to something, and Linquata should know — he owns two of Gloucester’s largest liquor stores, Sea Breeze Liquors in East Gloucester and Rail Road Ave. Liquors downtown.
“Fishermen’s Brew has done quite well,” says Linquata, referring to Gloucester’s hometown lager, which is made by the Cape Ann Brewing Company.
Linquata says spirits might take a little longer to catch on, but they will. The one question he has is price. And one would think that a handcrafted bottle of vodka is going to be considerably more expensive than even the high-end stuff massed produced in large distilling plants. But Ryan and Wood say that’s not the case.
“We’ll be competitively priced,” says Woods. “We can compete because we don’t have the high-paid directors and staff and all the overhead.”
Linquata does have one suggestion for the new business: If you want to sell something from Gloucester, your surest bet is to make it look like Gloucester. And in this case one of the best ways to do that might be to use an image of the city’s famous Fishermen’s Memorial.
“With the Man at the Wheel on the label, you can’t go wrong,” he says. Ryan and Wood already have a label for Beauport Vodka, one they describe as “pretty vanilla,” but who knows where they’ll go with Folly Cove Rum and the rest of their line as it develops.
Linquata figures they’ll go pretty far, and Gloucester and the rest of Cape Ann will be eager to check out the new hometown drink.
SPRINGFIELD – It got so bad here that even the trees were falling – their dead limbs crashing onto parked cars and into houses, spurring lawsuits against the city that couldn’t afford to cut the trees down.
How bad was it, five years ago? Springfield’s debt was relegated to junk bond status, its budget $41 million in the hole. Street lights were extinguished to save money. Taxes on thousands of properties were left uncollected. When federal agents launched an investigation into public corruption, 33 local officials were eventually convicted.
This was 2004, the nadir for the state’s third-largest city, a once storied manufacturing hub famous as the birthplace of Dr. Seuss and the game of basketball, still home to four colleges, a major hospital, and one of Massachusetts’ largest Fortune 500 companies.
“We had devolved into chaos,’’ said Jim Couture, a project specialist for MassMutual Financial Group.
At the stroke of midnight this morning, a grand experiment in local governance came to an end when the Springfield Finance Control Board, the state-appointed officials who took over the city five years ago to head off bankruptcy, handed the reins back to elected city officials. By many accounts, the city that the state control board returns is a much improved one, on solid financial footing, its operations streamlined, and with checks and balances to prevent another financial crisis.
“Drastic situations call for drastic intervention,’’ said Michael Goodman, director of economic and public policy research for the University of Massachusetts Donahue Institute. “Springfield would not be in a position to step forward but for the state’s decision to step in.’’
Even local elected officials who initially chafed under the control board’s authority say the work of the board was needed.
“The control board was able to accomplish a number of things in getting the finances straightened out,’’ said William Foley, the City Council president, who serves on the five-member control board. “I think they did a good job.’’
Around the city, from the gorgeous Victorians in Forest Park to the dilapidated storefronts of the North End, many residents said this week that they feared the control board’s departure. The roster of city officials hasn’t changed dramatically since Springfield’s financial troubles came to a head in 2004, they said, and they worry that old practices will hold sway.
One woman, who declined to give her name as she watered the garden beside her Forest Park home, said some city officials were already backing off the control board’s $90-per-barrel annual trash fee – a sign, she added, of wrongly bowing to popular pressure.
“It’s the same old knuckleheads who are afraid to make the hard decisions,’’ she said.
Philip Tarpey, an attorney and resident for more than half a century, expressed a common sentiment as he lunched with his daughter downtown: “I am sorry to see the board go.’’
Yet, other locals said they were eager to see the out-of-towners return to Boston and elsewhere and leave governance to the officials elected by the people of Springfield. Unions say the five-member control board stripped their workers of fair wages and outsourced jobs in unfairly negotiated contracts.
Still other residents question the long-term effectiveness of the board’s work, saying the board failed to get at the root cause of the financial meltdown – grinding poverty born of decades of economic stagnation.
“They never engaged in a serious conversation about the way to grow jobs,’’ said Robert Forrant, a professor of regional economic development at the University of Massachusetts, Lowell, who grew up in Springfield and worked at the now-shuttered American Bosch factory, a machine toolmaker.
Control board officials say job creation was a constant current in their discussions. They point to jobs created on their watch – 300 Liberty Mutual call center positions, and 232 jobs at Performance Food Groups, for example – and the tapping of surplus funds for college counseling and financial aid, which they say will expand the educated base of the city and lure employers.
“We need more industry, long-term,’’ said Chris Gabrieli, the former gubernatorial candidate who was named chairman of the control board by Governor Deval Patrick in 2007. “But short-term, we’ve turned the corner from a sense that nothing positive was happening in town.’’
Mayor Domenic Sarno, a control board member, put it this way: “It’s been tough because we were stuck in triage or stabilization and we couldn’t get to that vision part of where you want the city to go. That’s what we are working on now with a good financial base.’’
Located an hour and a half from Boston, Springfield was once an epicenter of manufacturing, turning out machine parts, cars, guns, motorcycles. Its boulevards boasted Queen Anne Victorians, mansions rose on bluffs overlooking the Connecticut River, and the grand, columned Symphony Hall opened.
In the 1960s, the factories began moving to the South and overseas, taking the jobs that had made Springfield a regional powerhouse. Much of the middle class filtered away, leaving behind a population whose poverty grew more entrenched as new jobs failed to take root.
These were daunting challenges for any community. But Springfield was a city whose government had run amuck. When Governor Mitt Romney appointed the control board in 2004, more than 8,000 residents and businesses owed property taxes. The city was on the verge of not being able to make payroll. The Housing Authority’s executive director was under indictment, accused of spending public money on chandeliers, ceramic tile, carpets, and other items for his family’s homes.
When the control board came to power, much of its initial work was basic governance, but tough decisions were less fraught because they didn’t need voter approval. The board collected $31.6 million in outstanding property taxes, including some debts dating to the 1950s. The city began issuing parking tickets more aggressively, then collecting the fines – a novel idea at the time. Board members renegotiated 28 union contracts with city workers. They also changed the city’s health insurance purchasing mechanism, realizing an estimated $96 million savings over five years.
With that foundation, the board embarked on a more sophisticated agenda. It implemented a system that carefully tracks and compares departments and agencies’ performances. It put into place a citizen service line, 311, that uses a computerized tracking mechanism.
Today, the city budget is in the black. Officials report a surplus of $89.3 million, enough to repay the $52 million loan the state made to the city along with the creation of the control board.
Still, more than a third of Springfield’s children live below the poverty line; 9 percent of families rely on public assistance, according to a report by MassINC and UMass Dartmouth’s Urban Initiative, two nonprofit think tanks. The city’s teen pregnancy rate is the second highest in the state and growing, the report says. Shootings and gang violence remain news staples, although FBI statistics show that violent and property crime has dropped in the last five years. The city has an estimated 10.9 percent unemployment rate for May, higher than the statewide rate.
Travis Wray, 39, was laid off from his job in financial services. While he looks for work, he’s been volunteering with groups like the Urban League and helping to launch a group of young Springfield professionals, the sort of effort that he says will bring the city back.
“You have to believe in the city,’’ he said. “I see a foundation being laid for a rebirth.’’
Sarah Schweitzer can be reached at schweitzer@globe.com.
BOSTON—Months of squabbling between the mayor of Boston and organizers of the Tall Ships Atlantic Challenge 2009 ended with a deal that should provide clear sailing for a scheduled five-day visit by the vessels next month.Boston Mayor Thomas Menino and Massachusetts Gov. Deval Patrick on Wednesday announced a deal they brokered to cover security costs associated with the event and allow free public access to the tall ships—usually square-rigged sailing ships with tall masts.
Menino had threatened to keep spectators away from docks and said he would ask the Coast Guard to bar the tall ships from entering Boston Harbor unless Sail Boston, the sponsors of the event, paid the city for security costs. He maintained that the city was being forced to tighten its belt fiscally and could not afford the additional police overtime.
Sail Boston 2000, the last such extravaganza, drew 2 million visitors to the waterfront. That event cost the city $2 million in police overtime, security and other costs, Menino said in 2004.
The plan includes a $1 million contribution by the Massachusetts Convention Center Authority to cover security costs and an agreement by the Massachusetts Port Authority to bear the costs of docking at Massport’s piers.
Sail Boston also agreed to pay $250,000 to defer Massachusetts State Police costs.
“Government works best when all parties work together,” Menino said in a statement. “Hosting a public event that is both
free and open to all will be a welcome attraction this year as many of our residents and families are cutting back on vacation travel.”This year, nearly 50 ships set off in late April from Vigo, Spain, for the trans-Atlantic journey. They will make five other stops—in the Canary Islands, Bermuda, the United States and Canada—before concluding in Belfast, Northern Ireland, in August.
The first of the ships’ two American stops will be in Charleston, S.C., where they arrive June 25 for the city’s Harbor Fest for a five-day visit before continuing on to Boston on July 8.
Some previously planned elements of the event have been scaled back in Boston because of financial constraints. A parade of tall ships into the harbor has been scrapped, as have two fireworks displays.
WASHINGTON — Documents unearthed by congressional investigators reveal disagreements among senior Federal Reserve officials about how to handle Bank of America Corp.’s acquisition of Merrill Lynch, fueling concern on Capitol Hill over giving the central bank even more power to regulate the financial system.
Federal Reserve
The glimpse inside the regulatory machinery provided by emails, memorandums and handwritten notes show a Fed that wrestled with how tough it should be on Bank of America, one of the biggest U.S. banks. It also shows Fed officials questioning more broadly their response to the financial crisis months earlier.
In December, Bank of America approached top U.S. officials about abandoning a deal, forged in the heat of the crisis, to buy investment bank Merrill Lynch. In the end, the government arranged a $20 billion rescue package for the bank to cover growing losses at Merrill.
In between, the documents show areas of disagreement within some of the Fed’s 12 regional reserve banks.
The Federal Reserve Bank of Richmond, where supervision of Bank of America’s parent company is based, pushed for a tougher approach than other regulators, emails suggest. Bank of America officials appealed more than once to the Fed’s Washington headquarters to intervene.
Bank of America CEO “Ken [Lewis] may also raise his favorite perennial issue — that is, is the Richmond supervisory team on the same page as the [Fed] Board,” Fed governor Kevin Warsh wrote in an email Dec. 30 to Fed Chairman Ben Bernanke and other senior officials. “Richmond staff was on our call today, but prior to the call, it sounds like they may have threatened a little more than ideal…”
On Jan. 10, Fed General Counsel Scott Alvarez wrote to Mr. Bernanke and others that Richmond Fed President Jeffrey Lacker was raising some issues over the final deal. Mr. Lacker wanted the entire Federal Open Market Committee to vote on any loan to Bank of America.
Mr. Bernanke responded at 2:01 a.m.: “Thanks. If we are nimble we can manage this.”
Whether or not Mr. Bernanke threatened Mr. Lewis’s ouster over the rescue remains a source of contention. Mr. Lewis suggested in testimony to New York Attorney General Andrew Cuomo that the Fed chief did just that. Mr. Bernanke has denied making such a threat to Mr. Lewis.
On Jan. 16, just days before government aid for the deal was supposed to be announced, Federal Reserve Bank of Boston president Eric Rosengren sent Mr. Bernanke an email saying that the Fed shouldn’t dismiss too hastily the idea of tossing management at Bank of America.
Mr. Rosengren suggested such a shake up might be necessary, “particularly if we believe that existing management is a significant source of the problem.”
Mr. Bernanke, at a contentious hearing Thursday, defended the Fed against suggestions it had been too lenient with management.
“The supervisory process is not a onetime thing. It’s an ongoing process, and in an ongoing supervisory process, we have made demands of the Bank of America on terms of their board and management,” he told Rep. Dennis Kucinich (D., Ohio).
The documents reveal Fed officials questioning the central bank’s response to the financial crisis even before negotiations began on the effort to aid Bank of America’s acquisition of Merrill Lynch.
“At this point I have [the] sense that the hearts and minds war in Iraq was handled better than it has been in this crisis, particularly within the Fed system,” wrote Meg McConnell, a top Federal Reserve Bank of New York official, on the day the House of Representatives voted down the Bush administration’s first financial-rescue package, sending the Dow industrials down almost 800 points.
The Obama administration earlier this month proposed giving the Fed powers to oversee and examine the largest companies in the financial system.
The disclosures could bolster the central bank’s argument that it needs more power to manage future crises. One reason for the government’s lurching response last year, officials say, was that it didn’t have the needed tools.
The Fed has been dealing with a steady stream of criticism from Republicans. Democrats have recently joined in, and the disclosures being aired through the congressional inquiry have put the central bank on the defensive.
BikeNow Inc. Headquarters: Boston Employees: 3 Founded: 2008 Web:www.bcycle.com E-mail:amytrus@gmail.com Phone: 301-461-6170 The Pitch: BikeNow is seeking funding to buy and install its technology, pay its staff and market its product.
Bike Now Boston www.bcycle.com
PITCHING THE TECHNOLOGY
BikeNow’s product is an automated bicycle-share program for the Boston area, which it positions as a Zipcar Inc.-style service for bikes.
Users would swipe a card at a solar-powered station and ride off on one of the company’s bikes.
The company says it was formed in response to a city of Boston request for proposals for bike-sharing programs and is modeled on Paris’ Velib bike-share program. The startup plans to roll out 1,500 bikes at 150 locations, translating to 9,000 rides a day.
BikeNow plans to generate revenue through subscriptions, helmet sales, rental fees, sponsorships and advertising on bikes and stations.
PITCHING THE PEOPLE Who is on the management team? Amy Trus, Jeff Dang and James Sinclair, co-founders.
Have executives been involved in a cashout prior to this venture? No.
Who is on the board of advisers? Erik Molander, entrepreneurship professor at Boston University and former director of CSX Transportation Inc.; Ben Morris, owner, Boston Pedicab Inc.; Cambridge city councilman Craig Kelley; and Mark Williams, finance professor at BU.
PITCHING THE BUSINESS How much money is being sought? BikeNow is seeking $2 million.
What partnerships, collaborations or affiliations are already in place? The startup says it’s partnered with B-cycle LLC — which supplies its technology — Trek Bicycle Corp., health insurance company Humana Inc., and advertising agency Crispin Porter + Bogusky.
List any federal or state grants, contracts or awards received: BikeNow was a finalist in the BU $50K Business Plan Competition.
What’s the market size being pursued? BikeNow says it expects to attract about 2.4 percent of the 900,000 people living in Boston, Brookline and Cambridge — 22,000 people — and 200,000 tourists in its first year.
Who are the likely competitors, direct or indirect? BikeNow competes with corporate bike share programs, bicycle ownership, public transportation and car ownership.
Despite the weak economy, comedy clubs around Boston like the Improv Asylum are seeing a steady flow of customers.
Photo: NICOLAUS CZARNECKI/METRO
Comedy clubs bank on
recession laughs
When the economy is bad, laughter is often an effective way to cope. That’s a good thing for area comedy clubs, several of which say patrons are still crowding their venues for much-needed escapes.
Richard Jenkins, owner of the Comedy Studio in Harvard Square, said business is up 10 percent compared to last year. He pointed to tickets of $10 or less as a major selling point to customers yearning for entertainment on the cheap.
“Stand-up comedy is one of most affordable entertainment options someone has, so to be able to have a good night out and save money looks very appealing,” Jenkins said. “We’re turning away more people, and we’re selling out on a regular basis.”
At ImprovBoston in Central Square, managing director Daniel Binderman said, “Sales holding up pretty well.” Meanwhile, at the Improv Asylum in the North End, a third show on Saturday nights and a Sunday evening show were added in April to meet the growing demand.
“I think the fact that people are looking for more local things at home to do has helped,” said events manager Kristin Martin.
It’s not just smaller venues that are enjoying the business. Sales remain strong at the Comedy Connection — which moved from Faneuil Hall to the 1,100-seat Wilbur Theatre last July — according to marketing director Andrew Mather.
“We are actually are selling very well,” said Mather, who credited part of the reason to more customers from the suburbs, perhaps opting to stay closer to home for excursions. “We’ve haven’t seen a lag in sales at all.”
(Fortune Magazine) — These are tempting times for real estate bargain hunters. Whether it’s the tony house down the street with an asking price that keeps dropping or office space at a deep discount, if you have the means, there are deals to be had. Individual investors snapping up foreclosed houses have helped boost home-sale figures sharply in recent months (although prices have remained depressed). And now some real estate investment trusts are raising money to fund acquisitions of distressed commercial properties.
In April we pointed out that financially strong REITs offered attractive yields. That remains the case. But now some of the equity REITs with stronger balance sheets are looking to move from defense to offense, building billion-dollar war chests to fund acquisitions of troubled properties on the cheap. Indeed, if you believe that now is a once-in-a-generation opportunity to buy low in real estate, REITs allow you a way to bet on a rebound in the market without getting approval for financing and taking possession of a piece of property yourself.
And there seems to be no shortage of prospective purchases. There is an estimated $90 billion in commercial real estate in the U.S. alone that is “distressed,” according to New York-based real estate research firm Real Capital Analytics. These are properties that have been foreclosed on, or whose owners are in default on their loans or in bankruptcy. “On top of those properties, there is hundreds of billions more in debt coming due in the next few years,” says Peter Slatin, editorial director at Real Capital. “Some REITs are getting prepared for that.”
Are they ever. REITs have raised about $12 billion by issuing stock in recent months. Among them are well-known names such as Boston Properties (BXP), Regency Centers (REG), Simon Property Group (SPG), and Vornado Realty Trust (VNO). “Our mood here is getting a little bit more forward-thinking than it has been over the last six months,” Simon Property chairman and CEO David Simon told analysts during the company’s earnings call May 1. One big opportunity the gang at Simon is keeping an eye on is the portfolio of General Growth Properties, the real estate giant that filed for Chapter 11 in April, taking more than 160 properties with it, including such trophies as Faneuil Hall Marketplace in Boston and South Street Seaport in New York City.
The four blue-chip REITs cited above represent a fairly conservative way for individual investors to profit from the (hoped-for) real estate rebound. The fact that they have the resources to exploit today’s weak market may set them up for years of healthy cash flows. “These are the commercial real estate companies that are going to survive,” says Jim Sullivan, senior REIT analyst with Green Street Advisors. “They all have balance sheets that are stronger than average and management teams that have proven their ability to take advantage of downturns.”
But there are other ways to play. The distress in the market has emboldened some privately held real estate funds (including newly formed ones) to raise money by offering stock to the public. These companies aren’t focused on owning property but on the debt underlying it. On June 11, Cypress Sharpridge Investments (CYS), which invests in mortgage-backed securities (yes, those infamous bonds), raised about $100 million in an IPO. And several more IPOs are in the works, including a proposed $500 million offering from Starwood Property Trust, led by former chairman of Starwood Hotels Barry Sternlicht, and a $750 million offering from PennyMac Mortgage, run by Stanford Kurland and other former executives of Countrywide Financial (yes, that Countrywide). And Invesco Mortgage Capital is looking to raise about $400 million to go shopping for debt. But these IPOs are for high-risk investors only.
And anyone who goes bargain hunting in real estate today has to be patient. REITs fell earlier and harder than the broader real estate market. In the two years from March 2007 to March 2009, REIT stocks fell a stunning 75% on average. Lately, however, REITs have been on a roll, with the MSCI U.S. REIT index gaining more than 45% since the March low. Does this spurt mean that REITs are foreshadowing a sharp rise in real estate values? Some experts caution that there is more pain to come. “Prices have gotten ahead of the fundamentals in real estate,” says Kenneth Rosen, chairman of the Fisher Center for Real Estate and a professor emeritus at the University of California at Berkeley. “It has gone too far, too fast.” Rosen expects a correction in the coming months.
But many analysts like the longer-term outlook. “The underpinnings of the commercial real estate market are really in pretty good shape,” says Philip Martin, a senior vice president of Golub & Co., a Chicago-based real estate investment and development firm. He notes that there isn’t the kind of massive oversupply of commercial properties that existed during the slump of the late 1980s and early 1990s. “So when we do recover, you are likely to see a pretty healthy snap-back in real estate prices,” he says. “This is an excellent environment for those REITs with the right combination of knowledge and capital. They are going to have an opportunity to make some great deals, and the risk-adjusted returns at this point in the real estate cycle are going to be pretty darn good.”
© 2010 Scripps Ne
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Mary Callahan Erdoes, JPMorgan Chase
Google today launched a 
U.S. payment-card industry grapples with security
” he added. Another post linked to a review of runners’ watches on the New York Times’ Gadgetwise blog.
The hundreds of billions in rescue funds needed to support banks — and the trillions in implicit subsidies — has brought the question of appropriate institutional size to the forefront of regulatory reform. Not surprisingly, FDIC Chairwoman Sheila Bair and Federal Reserve Chairman Ben Bernanke favor measures collectively intended to limit the size of banks in the future, Bloomberg News 
