Friday, June 19, 2009

Energy pulls on Dow, S&P; Microsoft buoys Nasdaq

Energy pulls on Dow, S&P; Microsoft buoys Nasdaq
By Leah Schnurr
NEW YORK (Reuters) - The Dow slipped on Friday and the S&P 500 was flat as falling oil prices pressured energy shares, but Microsoft boosted the Nasdaq and tech sector after positive broker comments for the software maker.
Microsoft (MSFT.O) jumped 2.6 percent to $24.11 after Goldman Sachs added shares of the world's largest software company to its Americas "conviction buy" list and said new products and an increase in information technology spending should underpin growth.
Energy shares led the Dow lower and dragged on the S&P 500 as oil prices fell below $70 a barrel on bets there would be ample fuel supply for the summer vacation season.
While rising oil prices can be a positive signal that demand and the global economy are strengthening, higher prices are a hindrance on consumers who are already curbing spending. Exxon Mobil (XOM.N) fell 1.2 percent to $70.57.
Markets were also buffeted by the end of the two-day quadruple witching period, the expiration and settlement of June stock and index futures and options, which can increase volatility.
"You would expect to see some intraday volatility, which may not be measured by the VIX, because most of the activity is in the June contracts which expire and settle today," said Joe Kinahan, chief derivatives strategist at online brokerage firm thinkorswim Group in Chicago.
The Dow Jones industrial average .DJI lost 37.63 points, or 0.44 percent, to 8,517.97. The Standard & Poor's 500 Index .SPX was up just 0.04 point, or unchanged on a percentage basis, at 918.41. The Nasdaq Composite Index .IXIC gained 13.21 points, or 0.73 percent, to 1,820.93.
Four types of June futures and options contracts expire or settle on Friday, a quarterly event that tends to generate high volume as investors adjust or exercise their derivative positions. This can heighten volatility, though the CBOE Volatility Index .VIX was down 5.3 percent.
Technology shares' gains helped support the S&P 500.
Apple Inc (AAPL.O) rose 1.3 percent to $137.60 as its latest iPhone hit stores. While the new product release drew crowds to Apple's flagship New York store, the line was shorter than for previous launches.
(Additional reporting by Doris Frankel; Editing by Jan Paschal)

Source: Reuters

U.S. states seek to join feds in AIG bonus probe

By Jonathan Stempel
NEW YORK (Reuters) - U.S. states probing employee bonuses paid by American International Group Inc (AIG.N) using taxpayer money plan to join federal investigators in the matter rather than press the case themselves.
Since March, a 19-state coalition has been investigating $165 million of bonuses paid at an AIG unit whose losses on derivatives would lead to a $180 billion taxpayer bailout. The government now owns close to 80 percent of New York-based AIG.
In a Friday letter to Neil Barofsky, the special inspector general of the Treasury Department's Troubled Asset Relief Program, the attorneys general of 11 states said it would be best to collaborate on the matter.
"Despite a pledge to Congress of cooperation and transparency, it remains unclear how much of the $165 million in bonuses will be returned to the company and thus the taxpayers who now own AIG," wrote New Jersey Attorney General Anne Milgram, who has led the state coalition.
Attorneys general of Arizona, Delaware, Illinois, Kentucky, Maine, Michigan, Mississippi, New Mexico, Ohio and Texas also signed the letter.
Barofsky and AIG did not immediately respond to requests for comment.
AIG had awarded the bonuses in its financial products unit, where losses tied to credit default swaps led to a $99.3 billion loss for the New York-based insurer in 2008.
The state coalition had been cooperating with New York Attorney General Andrew Cuomo, whose separate probe spurred some AIG officials to return their bonuses.
In the letter, Milgram suggested that AIG may have been telling only "half-truths" about the bonuses.
She noted that in March AIG told Congress it had paid $120 million of bonuses overall, and then two months later said the amount was actually $454 million.
Such discrepancies, she wrote, "raise serious questions about the completeness of AIG's characterizations of its financial condition."
AIG was once the world's largest insurer by market value. It is trying to sell businesses and shed toxic debt to help repay the government.
Shares of AIG shares were up 1 cent at $1.48 in afternoon trading on the New York Stock Exchange.
(Reporting by Jonathan Stempel; editing by John Wallace)

Source: Reuters

Stanford indicted in massive U.S. fraud case

Stanford indicted in massive U.S. fraud case
Stanford surrenders, faces court
Play Video
By Tabassum Zakaria
RICHMOND, Virginia (Reuters) - Texas billionaire Allen Stanford and four associates were indicted on fraud, conspiracy and obstruction charges in a $7 billion pyramid scheme to bilk investors, U.S. Justice Department officials announced on Friday.
Stanford, a flamboyant 59-year-old financier, will appear in federal court in Virginia to answer charges by a Texas grand jury that he orchestrated the fraud through his Antigua bank with the aid of company executives and an Antigua regulator.
He could face up to 250 years in prison if convicted on all charges, assistant Attorney General Lanny Breuer said in announcing the charges against Stanford, three company executives and the chief regulator in Antigua.
Breuer, speaking at a Washington news conference, said some 5,000 to 6,000 investors were hurt in the fraud.
Stanford faced a 3 p.m. EDT hearing before federal magistrate Hannah Lauck in Richmond after surrendering to FBI agents outside his girlfriend's house in Virginia late on Thursday. The hearing had earlier been set for 1:30 p.m. EDT.
Stanford, a colorful figure with a penchant for cricket, golf and publicity, holds dual U.S. and Antigua and Barbuda citizenship. He denies any wrongdoing and has said he would put up "the fight of my life" if indicted.
His case is the first major financial crimes prosecution brought under the administration of President Barack Obama, who has vowed to crack down on economic malfeasance amid a deep global recession.
Breuer said economic troubles made such regulation even more important and vowed the government "will remain vigilant in rooting out all such fraud."
With many Americans already angered by the financial sector crisis, investigators have been under heavy pressure to crack down on financial and corporate fraud cases after the government failed to respond to warnings over the years that money manager Bernard Madoff was running a massive swindle.
Madoff was arrested last year and admitted in March to orchestrating the biggest financial scam in Wall Street history.
Breuer said so far less than $2 billion in recoverable assets had been identified in the Stanford case.
Stanford already faces civil charges by the U.S. Securities and Exchange Commission that he fraudulently sold $8 billion in certificates of deposit with improbably high interest rates from his Stanford International Bank Ltd, headquartered in the Caribbean island of Antigua.
The SEC, saying Stanford had used Antigua as a "personal playground," filed new civil charges on Friday against company officials and an Antigua regulator, saying they aided Stanford in the $8 billion Ponzi scheme, or pyramid investment plan.
(Writing by John Whitesides; Additional reporting by Chris Baltimore in Houston and Jim Vicini in Washington; Editing by Frances Kerry)

Source: Reuters

U.S. homes recovery distressingly slow: Reuters/UMich

U.S. homes recovery distressingly slow: Reuters/UMich
NEW YORK (Reuters) - A "distressingly slow" U.S. housing recovery, with inflation-adjusted home values expected to decline over the next five years, makes it unlikely that housing wealth will drive consumer spending in the next decade, a Reuters/University of Michigan survey found.
Consumers are apt to maintain their renewed emphasis on savings and paring debt, Richard Curtin, director of the survey, said in a June home price update on Friday.
Housing wealth changes have a lagged impact on spending, and the influence of declines seen in 2008 will depress growth in consumer spending in 2009 and 2010, the survey said.
"To be sure, refinancing has reduced the burden of mortgage payments, giving consumers more discretionary income, but the refinancing impact on spending will fade as mortgage rates increase," Curtin said. "Moreover, conventional refinancing is largely limited to consumers whose home is worth about 20 percent more than their current outstanding mortgage."
The pool of those homeowners is fast shrinking with each month that home prices sink. On average, home prices nationally have slumped by more than 32 percent from mid-2006 highs, based on Standard & Poor's/Case-Shiller indexes.
Sixty percent of homeowners reported home price declines in the second quarter Reuters/University of Michigan surveys. The share of those reporting losses was greatest in the West, at 77 percent, and least in the South, at 51 percent.
Some signs of sentiment improvement emerged in the second quarter. Just 22 percent of those surveyed expected price declines in the year ahead, the lowest share since 2007.
The share of homeowners reporting price declines in the past year and expected further erosion in the year ahead fell to 28 percent in the second quarter from 35 percent in the first quarter and 43 percent a year ago.
"Declines in prices have prompted consumers to view home buying conditions much more favorably, but those same price declines have prompted the least favorable assessments of home selling conditions ever recorded," Curtin said.
Most home buyers are also sellers. As a result, many potential transactions are thwarted because the reluctance to sell at a "loss" is seen as greater than the advantage of the buying at a reduced price, he said.
(Reporting by Lynn Adler; Editing by James Dalgleish)

Source: Reuters

Switzerland strikes tax deal with U.S.

By Sam Cage and Sven Egenter
ZURICH (Reuters) - Switzerland and the United States have reached agreement on a double taxation treaty, the Swiss finance ministry said on Friday, a key step toward removal from a list of tax havens.
Switzerland, whose private banks manage around $2 trillion of foreign wealth, aims to secure 12 new bilateral tax deals by the end of 2009 which could allow it to be removed from an OECD "grey list" of states which need to improve tax cooperation and avoid possible sanctions from G20 nations.
Talks with Washington are particularly crucial for Berne as U.S. authorities have accused Swiss bank UBS of helping rich clients to hide money in secret Swiss accounts. UBS is losing clients because of the bad publicity.
While the Swiss-U.S. agreement had never been dependent on solving the case against UBS, it could prove difficult to force through parliament without a solution, a spokesman for the Swiss Finance Ministry said.
UBS shares reversed losses after the news and were 0.6 percent lower at 14.42 Swiss francs by 1514 GMT (11:14 a.m. EDT), behind a 1.6 percent higher European banking sector.
"That has brought hope that a solution for the UBS tax dispute will be found soon," one trader said.
"It's good news, in a way, that there are discussions," said Teresa Nielsen, an analyst at bank Vontobel. "But we would probably have to get more details on what is actually in the double tax agreement."
UBS declined to comment.
Under pressure from the G20, Switzerland agreed in March to relax its prized bank secrecy and accepted for the first time to share certain bank client data with other jurisdictions once bilateral tax treaties are ratified.
The U.S. deal is in compliance with OECD guidelines, the ministry said.
"The decision will permit an exchange of information on tax matters in individual cases where a specific and justified request has been made," it said in a statement.
It is the sixth such agreement the Swiss have struck, after Denmark, Norway, France, Mexico and one other unnamed country.
SECRECY
The U.S. Treasury confirmed it reached a deal with the Swiss government to revise a two-way income tax treaty to boost an information exchange aimed at combating tax evasion through offshore accounts.
"This treaty will increase our ability to enforce our tax laws and will help bring an end to an era of offshore accounts and investments being used for tax evasion," U.S. Treasury Secretary Timothy Geithner said in a statement. Continued...
Source: Reuters

Berkshire's Gen Re, Marsh win AIG suit dismissal

NEW YORK (Reuters) - Berkshire Hathaway Inc's (BRKa.N) (BRKb.N) General Re Corp and other companies have won dismissal of lawsuit accusing them of helping American International Group Inc (AIG.N) defraud investors.
Judge Leo Strine of the Delaware Chancery Court rejected AIG shareholder claims that officials at the reinsurer General Re, insurance broker Marsh & McLennan Cos (MMC.N) and insurer Ace Ltd (ACE.N) conspired with AIG officials including former Chairman Maurice "Hank" Greenberg to overstate AIG's finances.
In February, the judge had ruled that Greenberg and other former AIG executives could be sued over alleged misconduct.
Shareholders had alleged that AIG engaged in nearly one dozen conspiracies to bolster its financial position by billions of dollars, and which made it complicit in illegal schemes to rig bids for insurance contracts.
But in a 38-page opinion dated on Wednesday, Strine said it was inappropriate for AIG's shareholders to recover against other alleged corporate conspirators.
The judge said trying to apportion responsibility would subject courts to "extremely complex economic and fault-finding" inquiries into alleged misconduct. He also said it could encourage companies try to shift to their "partners in crime" some of the costs of an exposed conspiracy.
"In this context there is no societal interest in making sure that each party gets its 'fair' share of the conspirators' societally unfair bargain," Strine wrote.
Stuart Grant, a lawyer for AIG shareholders, said in an interview: "We were not surprised about the decision, given the ruling in the February case. We are considering our alternatives."
Several former AIG and General Re executives, including former General Re chief Ronald Ferguson, have been sentenced to prison over a group of transactions in 2000 and 2001 that helped AIG boost loss reserves. Warren Buffett, who runs Berkshire, was not implicated.
The alleged insurance bid-rigging involving Marsh and Ace was first raised in 2004 by then-New York Attorney General Eliot Spitzer.
The case is In re: American International Group Inc Consolidated Derivative Litigation, Delaware Chancery Court (Wilmington), No. 769-VCS.
(Reporting by Jonathan Stempel)

Source: Reuters

Wall Street opens higher on bets on economy

Wall Street opens higher on bets on economy
By Chris Sanders
NEW YORK (Reuters) - Stock index futures pointed to a higher open on Wall Street on Friday as a recent spate of improving economic data beckoned investors back into equity markets for a second day.
The International Monetary Fund underscored the sense of improving fundamentals after First Deputy Managing Director John Lipsky said the fund may lift its 2010 growth forecast for the world economy amid signs of moderation in the rate of decline in global output.
The Dow and S&P 500 snapped a three-day losing streak on Thursday as data on the job market and regional manufacturing revived hopes that the recession-hit economy is stabilizing.
"Sentiment is improving and a lot of people are taking the bet that the recession is over," said Anthony Conroy, head trader for BNY ConvergEx, an affiliate of the Bank of New York, in New York.
Goldman Sachs gave technology investors a new reason to begin buying after the bank added Microsoft Corp (MSFT.O) to its Americas 'conviction buy' list on improving revenue prospects, overshadowing a disappointing outlook from BlackBerry smartphone maker Research In Motion Ltd (RIM.TO) (RIMM.O).
Shares of software maker Microsoft, a Dow component, rose 2.2 percent to $24.02 in premarket trading.
S&P 500 futures rose 7.90 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 62 points, while Nasdaq 100 futures advanced 14.00 points.
Conroy added that the quarterly expiration and settlement of June equity options and futures, a convergence known as quadruple witching, will increase volatility throughout the session, possible pushing indexes higher.
After gaining as much as 40 percent from a 12-year closing low in early March, the S&P 500 has retreated as investors reassessed the potential strength of an economic recovery. Thursday's data revived some optimism, but analysts said real improvement is needed to sustain the rally.
On Thursday, government data showed the number of people staying on jobless benefits fell for the first time since January, while manufacturing in the U.S. Mid-Atlantic region contracted much less than expected in June.
After the close on Thursday, Research In Motion issued an outlook that fell short of expectations, sending the stock down 1.2 percent before the bell, even as the company reported a rise in quarterly profit that topped forecasts.
(Editing by Padraic Cassidy)

Source: Reuters

Stanford in U.S. court in massive fraud case

Stanford in U.S. court in massive fraud case
Stanford surrenders, faces court
Play Video
By Tabassum Zakaria
RICHMOND, Virginia (Reuters) - Texas billionaire Allen Stanford will appear in federal court in Virginia on Friday to answer allegations he orchestrated a massive fraud through his Antigua bank that bilked investors out of millions of dollars.
Stanford, 59, arrived at the courthouse for his initial court appearance before a federal magistrate to face criminal charges after he surrendered to FBI agents late on Thursday.
He already faces civil charges brought by the U.S. Securities and Exchange Commission (SEC) that he fraudulently sold $8 billion in certificates of deposit with improbably high interest rates from his Stanford International Bank Ltd, headquartered in Antigua.
"He surrendered," Dick DeGuerin, Stanford's Texas attorney, told Reuters by telephone on Thursday after speaking with his client. "He's in FBI custody."
Justice Department officials, including the U.S. attorney from Houston, plan to hold a news conference on Friday in Washington to announce the criminal charges.
Stanford, who holds dual U.S. and Antigua and Barbuda citizenship, denies any wrongdoing and has said he would put up "the fight of my life" if indicted.
"If the SEC had not come in and disemboweled a living, breathing strong organization the way they did, there's no question on God's green earth that everyone would have been made whole and we would have had a lot of money left over," Stanford told Reuters in an interview in April.
'MASSIVE PONZI SCHEME'
In its civil case, the SEC in February accused Stanford, his college roommate and three of their companies of carrying out a "massive Ponzi scheme" over at least a decade and misappropriating at least $1.6 billion of investors' money.
"This starts to bring closure for the victims," Jacob Frenkel, a former SEC enforcement official, said of the criminal indictment.
Stanford now faces concrete charges and "is no longer swinging at a pinata," said Frenkel, now an attorney in Rockville, Maryland.
Stanford, a golf and cricket promoter, is the first American to be knighted by Antigua and Barbuda in 2006. He made his first fortune in real estate in the early 1980s and expanded the family firm into a global wealth management company.
Before the SEC leveled the fraud charges, his personal fortune was estimated at $2.2 billion by Forbes magazine. Stanford was a generous sports patron and owned homes in Antigua, St. Croix, Florida and Texas.
To date, the only Stanford official to have faced criminal charges is Laura Pendergest-Holt, the chief investment officer for the Stanford Financial Group. She was arrested by the FBI in February and later freed on bail.
Pendergest-Holt and James Davis, Stanford's one-time roommate at Baylor University who served as the company's chief financial officer, were both named in the SEC's civil complaint. Continued...
Source: Reuters

Smaller crowds greet new iPhone from Apple

Smaller crowds greet new iPhone from Apple
NEW YORK/SAN FRANCISCO (Reuters) - The latest iPhone hit stores on Friday with new features and faster speeds, drawing some fans but not the crowds that had swarmed Apple and AT&T stores at previous iPhone launches.
At an AT&T Inc store near New York's Grand Central Terminal, a handful of people had lined up before 6 a.m. as store employees set up ropes and posts in the event that more consumers arrive later in the day.
"I converted from a PC to a Mac about two years ago and I prefer the operating system, and I think this will be a good compatibility to what I've got on my computer," said a woman named Diane who planned to buy an iPhone for herself and her preteen daughter. She declined to give her last name.
"I think it's going to make my life a little more efficient and easier, and have everything syncing more seamlessly."
The new iPhone, the 3GS, was unveiled last week at Apple Inc's annual developers' conference. Priced at $199 for a 16-gigabyte model, the smartphone features a faster processor, better battery life and the ability to take videos.
But because many people had already preordered the new phone, which offers a more modest technological leap over the current model, many analysts had predicted the first-day throng to be less than in previous launches.
At Apple's flagship New York store in midtown Manhattan, hundreds of shoppers queued up before the 7 a.m. opening but the line appeared shorter than in years past.
Apple released its first iPhone model two years ago, and it quickly became a consumer phenomenon. The second-generation 3G model was released last summer.
Apple has sold more than 40 million units of the iPhone and iPod Touch, which uses the same software. The touch-screen phone competes with the more business-oriented BlackBerry from Research in Motion Ltd and Palm Inc's new Pre, which has seen solid demand since its release this month.
The latest iPhone went on sale in the U.S. and seven other countries on Friday, available in the U.S. at AT&T stores, Wal-Mart and Best Buy, in addition to Apple outlets.
Shares of Cupertino, California-based Apple rose 1 percent in premarket trading to $137.57.
(Reporting by Franklin Paul and Gabriel Madway; Editing by Tiffany Wu and Brian Moss)

Source: Reuters

Fed's Hoenig says inflation a longer-term issue: report

WASHINGTON (Reuters) - Federal Reserve Bank of Kansas City President Thomas Hoenig said on Friday that the U.S. central bank was thinking seriously about its exit strategy, but inflation was not yet an imminent danger.
"I think the inflation outlook is one that is for the longer term. But I think ... the role of the central bank is to think longer term. And therefore we have to be mindful of that, and that is what this focus on an exit strategy is all about," he told CNBC Television in an interview.
"I am confident (the economy) will turn around. The turning point? I don't know at all. But I do know that with this amount of stimulus, both monetary and fiscal policy, it will turn around," said Hoenig, who will be a voter on the Fed's monetary policy-setting committee next year.
The Fed has cut interest rates to almost zero and doubled the size of its balance sheet to around $2 trillion by purchasing assets to shore up credit markets and reflate the economy as it fought the worst U.S. recession in decades.
"As soon as you introduce methods to deal with the crisis, as we did, that are out of the norm, you should very quickly begin to think about what your exit strategy is. And that is the process we are in right now and we're thinking it through," said Hoenig. He is among the more hawkish, or anti-inflation members of the Fed's policy-setting committee.
"We have put an enormous amount of liquidity into the system ... If it is allowed to remain indefinitely, and we keep a very low (interest) rate for an extended period of time, then we do risk an inflationary outbreak," Hoenig said.
This threat might not necessarily emerge next year, he said, but even if it was only going to be a problem in three or four years' time, policy-makers could not afford to ignore it.
"Some people think that is a long ways off. But in the context of history, that is very quick and I think it is something we need to be concerned about," he said.
(Reporting by Alister Bull; Editing by James Dalgleish)

Source: Reuters

Swiss strike tax deal with U.S.

By Sam Cage and Sven Egenter
ZURICH (Reuters) - Switzerland and the United States have reached agreement on a double taxation treaty, the Swiss finance ministry said on Friday, a key step toward removal from a list of tax havens.
Switzerland, whose private banks manage around $2 trillion of foreign wealth, aims to secure 12 new bilateral tax deals by the end of 2009 which could allow it to be removed from an OECD "grey list" of states which need to improve tax cooperation and avoid possible sanctions from G20 nations.
Talks with Washington are particularly crucial for Berne as U.S. authorities have accused Swiss bank UBS of helping rich clients to hide money in secret Swiss accounts. UBS is losing clients because of the bad publicity.
While the Swiss-U.S. agreement had never been dependent on solving the case against UBS, it could prove difficult to force through parliament without a solution, a spokesman for the Swiss Finance Ministry said.
UBS shares reversed losses after the news and were 1.3 percent higher at 14.69 Swiss francs by 1334 GMT (9:34 a.m. EDT), roughly in line with the European banking sector.
"That has brought hope that a solution for the UBS tax dispute will be found soon," one trader said.
"It's good news, in a way, that there are discussions," said Teresa Nielsen, an analyst at bank Vontobel. "But we would probably have to get more details on what is actually in the double tax agreement."
UBS declined to comment.
Under pressure from the G20, Switzerland agreed in March to relax its prized bank secrecy and accepted for the first time to share certain bank client data with other jurisdictions once bilateral tax treaties are ratified.
The U.S. deal is in compliance with OECD guidelines, the ministry said.
"The decision will permit an exchange of information on tax matters in individual cases where a specific and justified request has been made," it said in a statement.
It is the sixth such agreement the Swiss have struck, after Denmark, Norway, France, Mexico and one other unnamed country.
SECRECY
The U.S. government is suing UBS to retrieve thousands of names of American clients who allegedly stashed money in secret accounts in contravention of U.S. tax laws.
UBS is fighting the civil suit and says compliance would require its employees to commit fraud in Switzerland, which jealously defends its bank secrecy legislation. Continued...
Source: Reuters

U.S. stock futures signal gains; eyes on RIM

U.S. stock futures signal gains; eyes on RIM
(Reuters) - U.S. stock index futures pointed to a higher open on Wall Street on Friday, as stocks were poised to add to the previous session's gains.
At 0900 GMT, futures for the S&P 500 were up 0.2 percent, Dow Jones futures were up 0.4 percent and Nasdaq 100 futures were up 0.4 percent.
BlackBerry smartphone maker Research In Motion (RIM.TO) (RIMM.O) will be in focus after it offered investors an outlook on Thursday that fell short of some expectations, sending the company's stock down 5 percent after the bell, even as the group reported a rise in quarterly profit that topped forecasts.
The International Monetary Fund is likely to revise its 2010 growth forecast for the world economy up with signs the rate of decline in global output has moderated, First Deputy Managing Director John Lipsky said. But he also said it was too early to declare victory, with financial conditions far from normal and the world economy still in recession.
Target (TGT.N) on Thursday released the final vote count from its contentious annual meeting where investors soundly rejected dissident shareholder William Ackman's slate of five director nominees. Ackman got 19 percent of votes cast, while former Starbucks (SBUX.O) chief executive James Donald received 22 percent.
Bank of America Corp (BAC.N) chief executive Ken Lewis was approached by three former Merrill Lynch executives this year to discuss buying back some or all of their old company, but he rebuffed them, the Financial Times reported on its website.
Chief executives of some banks that received federal money, including Bank of America Corp, Morgan Stanley (MS.N) and Regions Financial Corp (RF.N), used company jets for personal use, the Wall Street Journal reported on its website. Flight records showed many occasions when banks receiving federal money flew planes to destinations near resorts or executives' vacation homes in Europe, Mexico, the Caribbean, south Florida and Aspen, according to the paper.
Kohlberg Kravis Roberts & Co KKR.UL is considering separating a plan that links buying its Amsterdam-listed fund with its own moves to list on the NYSE, a source familiar with the matter said, throwing further doubt on whether the private equity giant will list in New York.
European stocks were up 0.8 percent in morning trade in a broad rally, led by banks such as HSBC (HSBA.L) and Credit Suisse (CSGN.VX), oil majors such as BP (BP.L) and mining groups like Xstrata (XTA.L).
The Dow and S&P 500 rose on Thursday, halting a three-session losing run, as data on the job market and regional manufacturing rekindled hopes the recession-hit economy was stabilizing.
The Dow Jones industrial average .DJI rose 58.42 points, or 0.69 percent, to 8,555.60. The Standard & Poor's 500 Index .SPX gained 7.66 points, or 0.84 percent, to 918.37. The Nasdaq Composite Index .IXIC was off just 0.34 of a point, or 0.02 percent, at 1,807.72.
(Reporting by Blaise Robinson; Editing by Dan Lalor)

Source: Reuters

Stanford in U.S. court Friday in massive fraud case

Stanford in U.S. court Friday in massive fraud case
By Chris Baltimore
HOUSTON (Reuters) - Texas billionaire Allen Stanford will appear in a federal court in Virginia on Friday over allegations of massive fraud involving his Antigua bank, U.S. officials said after he surrendered to the FBI.
Stanford is expected to be transferred to Houston after his initial court appearance to face criminal charges in a sealed indictment, a federal official told Reuters on condition of anonymity.
The golf and cricket promoter already faces civil charges brought by the U.S. Securities and Exchange Commission (SEC) that he fraudulently sold $8 billion in certificates of deposit with improbably high interest rates from his Stanford International Bank Ltd, headquartered in Antigua.
Stanford, 59, was spending the night in a Virginia jail and was due to appear before a federal magistrate judge on Friday morning in Richmond, the federal official said.
"He surrendered," Dick DeGuerin, Stanford's Texas attorney, told Reuters by telephone on Thursday after speaking with his client. "He's in FBI custody."
The Justice Department and Federal Bureau of Investigation declined to comment on Stanford's arrest.
Justice Department officials, including the U.S. attorney from Houston, plan to hold a news conference on Friday in Washington to announce the criminal charges.
Stanford, who holds dual U.S. and Antigua and Barbuda citizenship, denies any wrongdoing and has said he would put up "the fight of my life" if indicted.
"If the SEC had not come in and disemboweled a living, breathing strong organization the way they did, there's no question on God's green earth that everyone would have been made whole and we would have had a lot of money left over," Stanford told Reuters in an interview in April.
'MASSIVE PONZI SCHEME'
In its civil case, the SEC in February accused Stanford, his college roommate and three of their companies of carrying out a "massive Ponzi scheme" over at least a decade and misappropriating at least $1.6 billion of investors' money.
"This starts to bring closure for the victims," said Jacob Frenkel, a former SEC enforcement official, referring to the criminal indictment.
Stanford now faces concrete charges and "is no longer swinging at a pinata," said Frenkel, now an attorney in Rockville, Maryland.
The first American to be knighted by Antigua and Barbuda in 2006, Stanford made his first fortune in real estate in the early 1980s and expanded the family firm into a global wealth management company.
Before the SEC leveled the fraud charges, his personal fortune was estimated at $2.2 billion by Forbes magazine. Stanford was a generous sports patron and owned homes in Antigua, St. Croix, Florida and Texas. Continued...
Source: Reuters

Decline in world economy moderating: IMF's Lipsky

By Selcuk Gokoluk
BODRUM, Turkey (Reuters) - The International Monetary Fund is likely to revise its 2010 growth forecast for the world economy up with signs the rate of decline in global output has moderated, a senior IMF official said on Friday.
Addressing a Turkish business conference in this southern Turkish resort, IMF First Deputy Managing Director John Lipsky, however, warned it was far too early to declare victory, with financial conditions far from normal and the world economy still in recession.
"While the latest data point to a slowing of the global contraction, there is still great uncertainty regarding the timing and pace of economic recovery," he said in prepared remarks to the Turkish Industrialists' and Businessmen's Association.
Turning to the economy of his hosts, Lipsky said Turkey may be on the verge of recovery but its rising fiscal deficit could hamper the rebound in growth.
He said consumer confidence in Turkey has rebounded strongly and manufacturing and employment have picked up, but he warned that Turkey's fiscal gap was a concern.
"The rising fiscal deficit and weakening loan quality could -- if not addressed forcefully -- cloud the growth outlook, including by curtailing banks' ability to extend credit," he said.
Lipsky and other IMF officials have met Turkish Treasury officials over the past two days, prompting market gains on hopes the country was close to an IMF loan accord. But an IMF official told Reuters on Thursday a deal had not been reached, reining in market optimism.
The IMF is scheduled to present updated forecasts for the world economy on July 7 in Washington. In its previous forecast in April, the Fund projected the world economy would contract 1.3 percent this year in the deepest recession since World War Two and then rebound to grow at 1.9 percent next year.
SLUGGISH RECOVERY
Lipsky said the recovery next year will be sluggish, with activity in the world's advanced economies likely to revive only gradually, weighed down by financial deleveraging, restrained credit growth and weak household income growth.
Meanwhile, emerging markets will be unable to return to trend growth while advanced economies are still underperforming.
"As a result, output gaps and unemployment rates in most economies should continue rising through 2010," Lipsky warned.
He emphasized that policies need to focus on a sustained recovery, starting with reviving the financial sector.
So far, progress overall in nursing banks back to health had been slow and uneven, while little had been done to resolve the problem of toxic assets on banks' balance sheets.
"In order to lay the ground for a revival of bank credit growth, the near-term focus of policies should continue to be on restructuring weakened financial institutions by cleansing banks' balance sheets of impaired assets, assessing bank viability, and ensuring bank recapitalization where needed," he said. Continued...
Source: Reuters

Asia stocks snap 4-day slide, bond yields up

By Eric Burroughs
HONG KONG (Reuters) - Asian stocks snapped a four-day slide on Friday and government bond yields climbed after upbeat U.S. factory and jobs data provided more evidence that the global economy is recovering from its deep recession.
A slowing pace of contraction in the Philadelphia Federal Reserve's regional gauge of manufacturing and a rise in the expectations index to its highest since September 2003 -- when the U.S. economy was healing from its last recession -- comforted investors.
But the rise in Asian equity markets was slight compared with the gains on Wall Street, and higher-yielding ones lost some ground after the previous day's jump as market players turned cautious toward the end of the second quarter.
Analysts said that while the latest economic news out of the United States was a clear positive, the road to recovery was likely to be a long slog.
"U.S. economic data is pointing to an end to the U.S. recession. Good news? Absolutely. But unfortunately the end of recession does not mean the end of pain," said Patrick Bennett, Asia FX and interest rate strategist at Societe Generale in Hong Kong.
The April-June quarter has been a bumper one for portfolio managers on mounting signs the worst of the recession had passed, with Asian stocks outside Japan up 28 percent so far and poised for their biggest quarterly gain in 16 years.
The MSCI index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.3 percent but was down 5.4 percent on the week, which would be the biggest such drop since late February -- just before the stock market's rally began in March.
Since the lows hit in early March, the MSCI benchmark of Asian shares has soared nearly 50 percent.
Bucking the trend, the Shanghai Composite index .SSEC slipped 0.1 percent after reaching an 11-month intraday peak in early trade as the first initial public offering since September came to the market, the start of an expected wave of share sales.
Investors are keeping an eye out for sharp market moves toward the end of the quarter, with the hefty gains for riskier assets likely spurring profit-taking as hedge funds and asset managers close their books.
Later on Friday June U.S. stock futures and options will expire, and many positions will be rolled into September contracts -- another potential spark for sudden moves.
Futures on the U.S. S&P 500 were little changed in Asia after the index rose 0.9 percent on Thursday.
BONDS HIT BUT DOLLAR DRIFTS
Asian bond markets tracked the drop in U.S. Treasuries the previous day on the surprisingly good economic figures, nudging yields back near peaks hit earlier in the month.
U.S. bond dealers were also spooked after the Treasury said it would sell a record $104 billion of debt next week, the latest of the massive auctions to fund stimulus spending. Continued...
Source: Reuters

Stanford in US court Friday in massive fraud case

Stanford in US court Friday in massive fraud case
By Chris Baltimore
HOUSTON (Reuters) - Texas billionaire Allen Stanford will appear in a federal court in Virginia on Friday over allegations of massive fraud involving his Antigua bank, U.S. officials said after he surrendered to the FBI.
Stanford is expected to be transferred to Houston after his initial court appearance to face criminal charges in a sealed indictment, a federal official told Reuters on condition of anonymity.
The golf and cricket promoter already faces civil charges brought by the U.S. Securities and Exchange Commission (SEC) that he fraudulently sold $8 billion in certificates of deposit with improbably high interest rates from his Stanford International Bank Ltd, headquartered in Antigua.
Stanford, 59, was spending the night in a Virginia jail and was due to appear before a federal magistrate judge on Friday morning in Richmond, the federal official said.
"He surrendered," Dick DeGuerin, Stanford's Texas attorney, told Reuters by telephone on Thursday after speaking with his client. "He's in FBI custody."
The Justice Department and Federal Bureau of Investigation declined to comment on Stanford's arrest.
Justice Department officials, including the U.S. attorney from Houston, plan to hold a news conference on Friday in Washington to announce the criminal charges.
Stanford, who holds dual U.S. and Antigua and Barbuda citizenship, denies any wrongdoing and has said he would put up "the fight of my life" if indicted.
"If the SEC had not come in and disemboweled a living, breathing strong organization the way they did, there's no question on God's green earth that everyone would have been made whole and we would have had a lot of money left over," Stanford told Reuters in an interview in April.
'MASSIVE PONZI SCHEME'
In its civil case, the SEC in February accused Stanford, his college roommate and three of their companies of carrying out a "massive Ponzi scheme" over at least a decade and misappropriating at least $1.6 billion of investors' money.
"This starts to bring closure for the victims," said Jacob Frenkel, a former SEC enforcement official, referring to the criminal indictment.
Stanford now faces concrete charges and "is no longer swinging at a pinata," said Frenkel, now an attorney in Rockville, Maryland.
The first American to be knighted by Antigua and Barbuda in 2006, Stanford made his first fortune in real estate in the early 1980s and expanded the family firm into a global wealth management company.
Before the SEC leveled the fraud charges, his personal fortune was estimated at $2.2 billion by Forbes magazine. Stanford was a generous sports patron and owned homes in Antigua, St. Croix, Florida and Texas. Continued...
Source: Reuters

KKR rethinks deal, may impact listing: source

By Megan Davies
NEW YORK (Reuters) - Kohlberg Kravis Roberts & Co KKR.UL is considering separating a plan that links buying its Amsterdam-listed fund with its own moves to list on the NYSE, a source familiar with the matter said, throwing further doubt on whether the private equity giant will list in New York.
KKR's plans to follow in Blackstone Group's (BX.N) footsteps and become a publicly-traded New York Stock Exchange-listed company hinge on a complex deal to buy its fund, known as KPE.
Separating the two plans would give KKR, co-founded by "buyout king" Henry Kravis, the option to buy its Amsterdam-listed fund without the pressure of having to list at a difficult time to go public. The company could later decide to list under a different method if it desired.
KKR said in July 2008 it would buy Euronext-listed KKR Private Equity Investors (KPE), delist it from Euronext and launch the combined new company on the NYSE under the stock symbol "KKR" KKR.N. KKR had previously considered a more conventional initial public offering.
But KKR and KPE said in March they were reevaluating the deal in the face of the global financial crisis and later extended by four months the deadline to buy the fund -- to August 31.
"As a matter of policy, we do not comment on rumors or speculation," KKR said in an emailed statement late on Thursday. "We and the KPE Board continue to evaluate the advisability of the transaction. Any official announcement related to the transaction will be made via press release."
The details were earlier reported by the Financial Times, which cited people familiar with the matter saying KKR is holding talks with a shareholder of KPE about a merger without a New York listing - at least for the time being.
The new arrangement could involve altered terms for the deal under which KPE shareholders would receive stakes in the combined entity, the FT report said.
It cited people close to the talks saying they were preliminary and cautioned that the outcome was uncertain.
The source who spoke to Reuters said that no decisions have been made.
The private equity industry has been struggling with the absence of leverage for new deals, as well as troubled portfolio companies and investors hurt by a fall in equities.
Rival Blackstone (BX.N), the only other major U.S. private equity firm to go public, is trading at around $11.15, significantly less than its June 2007 IPO value of $31 a share.
(Reporting by Megan Davies and Ritsuko Ando; Editing by Dhara Ranasinghe)

Source: Reuters

Stanford surrenders to FBI, in court Friday

Stanford surrenders to FBI, in court Friday
By Chris Baltimore
HOUSTON (Reuters) - Texas billionaire Allen Stanford has surrendered to authorities and will face criminal charges on Friday over allegations of massive fraud involving certificates of deposit issued by his Antigua bank, his lawyer said.
Stanford was due to appear in a federal court in Richmond, Virginia, on Friday morning, the Associated Press said, citing federal authorities.
The 59-year-old golf and cricket promoter gave himself up in Virginia on Thursday, Dick DeGuerin, Stanford's Texas attorney, told Reuters by telephone.
"He surrendered," DeGuerin said after speaking with Stanford, who had been staying with his girlfriend in Fredericksburg, about 50 miles south of Washington. "He's in FBI custody."
The Justice Department and Federal Bureau of Investigation declined to comment.
It was not yet clear what criminal charges Stanford faces. According to the Houston Chronicle, a grand jury weighing the charges returned a sealed indictment earlier on Thursday.
Stanford already faces civil charges brought by the U.S. Securities and Exchange Commission (SEC) that he fraudulently sold $8 billion in certificates of deposit with improbably high interest rates from his Stanford International Bank Ltd, headquartered in Antigua.
Stanford has denied any wrongdoing.
Before the SEC leveled fraud charges against Stanford, his personal fortune was estimated at $2.2 billion by Forbes magazine. He was a generous sports patron and owned homes in Antigua, St. Croix, Florida and Texas.
Nigel Hamilton-Smith, the Antiguan official named to oversee the liquidation of the offshore bank that was run by Stanford, has accused the tycoon of using client funds to pay for jets, lavish homes and yachts.
Stanford's Antiguan liquidators and the company's U.S.-based receiver have been locked in a battle over control of the offshore bank.
Ralph Janvey, the Dallas lawyer appointed by U.S. District Judge David Godbey to oversee Stanford's assets and operations, has filed court papers arguing he should oversee the Antigua bank along with the U.S.-based Stanford entities he controls.
The Antiguan liquidators disagree.
(Reporting by Chris Baltimore; Editing by Paul Simao)

Source: Reuters

Dow, S&P end 3-day drop on data, financials

Dow, S&P end 3-day drop on data, financials
By Leah Schnurr
NEW YORK (Reuters) - The Dow and S&P 500 gained on Thursday, breaking a three-day losing streak, as data on the job market and regional manufacturing revived hopes that the recession-hit economy is stabilizing.
After gaining as much as 40 percent from a 12-year closing low in early March, the S&P 500 has eased as investors reassessed the potential strength of an economic recovery. The day's data revived optimism, but analysts said real improvement is needed to sustain the rally.
Financials supported the stock market after being among the week's biggest drags. Discover Financial Services (DFS.N) gained 4 percent to $9.27 after it reported a smaller-than-expected operating loss as bad loans grew less than anticipated.
Lincoln National (LNC.N) rose 6.9 percent to $15.92 after an upgrade from Credit Suisse, and the KBW insurance index .KIX rose 1.8 percent. The S&P financial index .GSPF gained 2.5 percent.
Data showed the number of people staying on jobless benefits fell for the first time since January, while manufacturing in the U.S. Mid-Atlantic region contracted much less than expected in June.
"The data supports the case of those looking for the bottom of the economy in this quarter," said Jim Awad, managing director at Zephyr Management in New York.
The Dow Jones industrial average .DJI rose 58.42 points, or 0.69 percent, to 8,555.60. The Standard & Poor's 500 Index .SPX gained 7.66 points, or 0.84 percent, to 918.37. The Nasdaq Composite Index .IXIC was off just 0.34 of a point, or 0.02 percent, at 1,807.72.
The Nasdaq ended little changed as some big-cap technology companies fell.
RIM SLIDES ON OUTLOOK
Research In Motion (RIM.TO) (RIMM.O) fell 5.2 percent to $72.54 after the bell after its quarterly profit rose, but the BlackBerry maker gave an outlook that may disappoint some investors.
The stock had ended Nasdaq's regular session at $76.55, down almost 1 percent.
Healthcare companies and other defensive names -- deemed better positioned to withstand a still uncertain economy -- also buoyed the market. Merck & Co Inc (MRK.N) jumped 3.6 percent to $25.65.
"People are hedging their bets by saying we're going to stay in, but stay in defensively to protect their gains," said Awad.
Friday marks the end of the two-day quadruple witching period, referring to the expiration and settlement of June stock and index futures and options, which may increase volatility. The CBOE Volatility Index .VIX was down 4.8 percent, but slightly above the psychologically important 30 level.
On the downside, Caterpillar Inc (CAT.N) shed 2.1 percent to $34.08 after the heavy machinery maker said its retail sales of machines had fallen at a faster pace in May. The stock was the Dow's biggest drag. Continued...
Source: Reuters

RIM outlook disappoints, sending shares lower

RIM outlook disappoints, sending shares lower
By Wojtek Dabrowski
TORONTO (Reuters) - Research In Motion offered investors an outlook on Thursday that fell short of some expectations, sending the BlackBerry maker's stock sliding 5 percent even as the company reported a higher quarterly profit that topped forecasts.
The share price's drop may reflect concern over a competitive landscape that has become more cluttered with alternatives to the BlackBerry, as well as lingering doubts about the impact of the global economic slowdown on both consumer and corporate spending
Earlier this month Apple Inc, a major rival in the consumer market, said it would cut the price of older models of its popular iPhone. Palm, a weaker competitor that could be gaining traction, recently launched its well-received Pre handset.
While some investors may not be so sure, RIM's outlook is still robust, said independent technology analyst Carmi Levy. It shows the Waterloo, Ontario-based company is still confident of its ability to keep pace with the competition, he said.
"They see it as a threat," he said of RIM's attitude toward rivals' new handsets and their aggressive prices. "They just don't see it as highly likely that it's really going to take them down significantly."
RIM earnings rose to $643.03 million, or $1.12 a share, in the three months ended May 30, from $482.5 million, or 84 cents, a year earlier.
Adjusted income in the quarter was 98 cents a share.
Analysts on average had expected RIM to earn 92 cents a share before one-time items, on revenue of about $3.4 billion, according to Reuters Estimates.
Revenue jumped to $3.42 billion from $2.24 billion as the smartphone maker added another 3.8 million new subscribers, pushing its total to almost 29 million.
For the second quarter ending August 29, RIM said it expects revenue of between $3.45 billion and $3.7 billion, and earnings per share of between 94 cents and $1.03.
Canaccord Adams analyst Peter Misek said the results marked "a solid quarter," but RIM's outlook may fall short of what some were forecasting.
"Expectations going into this were really, really high so I think there's going to be a little bit of disappointment with the guidance," he said.
RIM said it expects to add between 3.8 million and 4.1 million subscribers in the second quarter. Chief executive Jim Balsillie told analysts this is based on strong demand, new product launches and carrier promotions through the summer and into the fall.
As well, Balsillie said about 80 percent of new subscribers in the last quarter were "non-enterprise" -- or non-corporate -- signaling that RIM's push into the retail market continues to hold traction.
"These customers now represent over half of the total BlackBerry subscriber account base," Balsillie said. Continued...
Source: Reuters

Congress carves into Obama financial rule reforms

Congress carves into Obama financial rule reforms
Tightening rules
Play Video
By Kevin Drawbaugh
WASHINGTON (Reuters) - Senior U.S. lawmakers launched an assault on Thursday on the centerpiece of the Obama administration's financial reform plan -- giving the Federal Reserve new powers to police broad risks in the economy.
In addition to handling monetary policy, under the Obama plan the Fed would regulate "systemic risk" and try to prevent future financial crises, working with an inter-agency council.
"The Federal Reserve system was not designed to carry out the systemic risk oversight mission the administration proposes to give it," Senator Richard Shelby, the top Republican on the U.S. Senate Banking Committee, said at a hearing.
Concluding that the Fed is better qualified than any other government agency to handle such a job "represents a grossly inflated view of the Fed's expertise," Shelby said, reflecting the rapid spread of 'Fed fatigue' on Capitol Hill.
A day after President Barack Obama unveiled his plan, Treasury Secretary Timothy Geithner was defending it in testimony before the banking committee in the first of more than a dozen hearings before Congress by mid-July.
Other points of contention emerged during the session, including a proposal for establishing a consumer financial product safety agency and the administration's decision not to pursue more streamlining of bank supervisors.
The likelihood of the Obama plan emerging intact from Congress is remote, said William Donaldson, former chairman of the U.S. Securities and Exchange Commission, in an interview.
He called the plan "pretty positive, not too radical ... Now it becomes a matter of everybody else throwing their oar in. Clearly there are some differing opinions ...
"I think there's a feeling that maybe too much is being thrown into the Federal Reserve," he said. "I find it hard to believe they'll get anything done before year-end."
Geithner urged Congress to act quickly on regulatory reform in response to the crisis, which has focused public and government attention worldwide on oversight of banks and markets.
"We may disagree about the details, and we will have to work through those issues. But ordinary Americans have suffered too much; trust in our financial system has been too shaken; our economy has been brought too close to the brink for us to let this moment pass," he said.
BIGGEST CHANGES SINCE 1930S
Obama is proposing the most far-reaching changes in U.S. financial regulation since the 1930s, mirroring a similar effort already under way in the European Union.
Much of the Obama plan, under development for six months, will require legislative action from Congress. The president wants to sign legislation into law before the end of the year, an ambitious schedule as other pressing issues, including healthcare reform, are competing for Congress' time.
In the House of Representatives, where Democrats are in firm control, quick action is expected. But the outlook is unclear in the Senate, where the balance of power is held by a handful of moderates, some of them banking committee members. Continued...
Source: Reuters

Green shoots in U.S. jobs, factories and indicators

Green shoots in U.S. jobs, factories and indicators
Business Update: Hopes rebound
Play Video
By Burton Frierson
NEW YORK (Reuters) - The U.S. economy sprouted more green shoots of recovery in data released on Thursday, with weekly jobs figures showing unexpected improvement and the slumping factory sector revealing dramatic signs of a rebound.
The data stopped the week's stock market slide and shored up hopes that the U.S. economy, which has been in recession since December 2007, may have hit bottom, but the labor market and hard-hit factory sector clearly are not out of danger yet.
Indeed, the number of U.S. workers filing new claims for jobless benefits rose in the latest week, but economists were heartened by the first drop in the number of unemployed people remaining on benefit rolls since January and the biggest decline since November 2001.
This dovetailed well into a Federal Reserve report on manufacturing in the U.S. Mid-Atlantic area, where activity contracted in June for the ninth consecutive month but much less severely than anticipated and far less than the previous month.
Though analysts expressed caution over the data, they said it was in line with views that the economy's rate of deterioration is slowing, a necessary step before growth resumes.
"I think when you take a look at the numbers it clearly is an improvement going on," said Bill Schultz, chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania.
"Now the question is do we get back to the growth stage or whether this is just a rebound from the negativity that we've seen over the past year?"
Further support to economic optimists came from the Conference Board's forward-looking measure of the U.S. economy, which posted its biggest increase in five years in May.
On Wall Street, stocks were up a solid 1 percent in afternoon trade, halting a steep slide earlier in the week.
U.S. government bond prices, which benefit more from signs of economic weakness due to their low risk appeal, were down sharply.
BAD NEWS, GOOD NEWS
Initial claims for state unemployment insurance rose 3,000 to a higher-than-expected 608,000 last week, the Labor Department said. Analysts polled by Reuters were expecting claims to dip to 600,000 from a previously reported 601,000.
That was practically the only bad news in the day's numbers. In the same weekly jobs report, continued claims tumbled 148,000 to a smaller-than-anticipated 6.69 million in the week to June 6, the latest week for which data is available. It was the lowest since May 9, and the largest one-week drop since November 2001.
In another sign labor market weakness may be easing, the four-week moving average for new claims, considered a better gauge of underlying trends as it smooths out week-to-week volatility, dipped to 615,750, the lowest since February 14.
PHILADELPHIA STORY Continued...
Source: Reuters

Chicago Cubs talks reopen with rival bidder: sources

Chicago Cubs talks reopen with rival bidder: sources
By Ben Klayman and Megan Davies
CHICAGO/NEW YORK (Reuters) - Talks to sell the storied Chicago Cubs baseball team have reopened with a rival bidding group, and are continuing alongside negotiations with the original Ricketts family buyers, sources familiar with the situation said on Thursday.
Bankrupt media company Tribune Co, owner of The Los Angeles Times, has been trying to sell the Cubs for more than two years to reduce its debt burden. It agreed in January to sell the prized team and other assets for $900 million.
An exclusivity period between Tribune and the Ricketts group has ended and the media company is now talking to a group that includes private equity investors Marc Utay and Leo Hindery, three sources familiar with the situation said.
"We know that they went back to the Utay group," said one of the sources, who asked not to be identified because the sales process has not closed.
Spokesmen for Tribune Co and Tom Ricketts, who is leading his family's bid, said their talks are ongoing and Ricketts spokesman Dennis Culloton described them as positive. Utay and Hindery declined to comment.
Sports franchises' values have been hurt by the recession and tighter credit markets as analysts had expected the Cubs to draw bids topping $1 billion.
Buyers are eager to take control of the National League team, which despite not winning a World Series title since 1908 has a huge fan base helped by its "lovable losers" image and national exposure on cable TV.
Tribune Co, which also owns the Chicago Tribune, filed for bankruptcy in December due to its heavy debt load and the weak U.S. publishing sector. It put the Cubs, the team's famous Wrigley Field home and a 25 percent stake in a local sports TV network on the block in April 2007, when Tribune agreed to an $8.2 billion buyout led by real estate magnate Sam Zell.
Tribune Co agreed in January to sell the Cubs to a group led by Tom Ricketts, chief executive of Chicago investment bank Incapital LLC and son of the founder of TD Ameritrade Holding Corp.
However, the deal with Ricketts was not finalized before an exclusivity period ended. Several sources said that Tribune and Zell are now able to negotiate with other buyers.
"It is crystal clear that he's talking to others and the outcome's not determined," a second source said. "Until someone has signed a purchase agreement, anything is possible."
Tribune Co and its banker, JP Morgan, have entered into formal talks with the Utay/Hindery group and a deal could be reached late next week, a third source said.
However, others said the re-emergence of the Utay/Hindery group, which finished just shy of the Ricketts' offer in January, also could be Tribune Co's way to pressure Ricketts into settling on terms desired by the media company. Two sources described the sides as on the verge of a deal.
"That's just a way to keep the fire on the Ricketts," the first source said. "The Ricketts have never been closer to getting a deal done."
While the Ricketts group has lined up its financing, sources previously told Reuters that the sides have been unable to reach agreement on the value of Cubs' broadcast contracts.
(Reporting by Ben Klayman and Megan Davies; Editing by Lisa Von Ahn, Maureen Bavdek and Matthew Lewis)

Source: Reuters

IPhone to hit stores as Apple awaits Jobs' return

IPhone to hit stores as Apple awaits Jobs' return
By Gabriel Madway
SAN FRANCISCO (Reuters) - Few events in the technology world can rival the attention a new iPhone launch draws, but the return of Steve Jobs to Apple Inc would surely be one of them.
The new, souped-up iPhone 3GS goes on sale this Friday, as investors and gadget lovers alike await the presumed re-emergence of Apple's chief executive, who has been on medical leave for about six months.
The consumer electronics giant remains mum on exactly when and how Jobs will come back, repeating the now-familiar mantra that Apple looks forward to his return at the end of June.
It is possible, analysts say, that Jobs could soon shift to a new role to focus on big-picture issues and products, while Chief Operating Officer Tim Cook manages the day to day.
"At the very beginning, it will be him coming back as CEO. If they do make a transition, it will be a slower, methodical type of transition," said Pacific Crest Securities analyst Andy Hargreaves.
With Apple's shares already up 60 percent this year, few analysts expect Jobs' return to have a lasting impact on the stock beyond a short-term bounce. If Jobs reduces his role, analysts say a stock dip is also likely to be short-term as Wall Street has become more comfortable with other executives.
"People feel good not just about Tim Cook but about the depth of the team in general," Hargreaves said. "They have done a good job of trying to highlight some of the other people that are there."
Jobs, a pancreatic cancer survivor, stepped away from day-to-day duties in January, citing unspecified health issues. In his absence, Cook has overseen operations, although Apple said Jobs remains deeply involved in decision-making.
Analysts expect Jobs' return to be an understated affair at Apple. "We expect it to be very smooth," said Kaufman Bros analyst Shaw Wu. "We don't expect anything that different" from his departure on medical leave, which was announced in a personal message to company employees.
IPHONE LAUNCH
An example of how Apple continues to upgrade its product line even with Jobs on the sidelines is the new iPhone 3GS, which features a faster processor, video capability, an improved camera and better battery life.
The phone -- in the works before Jobs stepped away -- will compete with Research in Motion Ltd's BlackBerry and Palm Inc's Pre, which has seen strong early demand.
The 3GS goes on sale on Friday in the United States and seven other countries. Past iPhone launches have seen a circus-like atmosphere with some people camping out overnight, but crowds were scarce on the eve of this launch.
At Apple's flagship New York store in midtown Manhattan on Thursday afternoon, only three college students were lining up in the rain. "It's more evolutionary than revolutionary," said Matt Dodd, 18, echoing the words of at least one reviewer.
Dodd said he was not buying the 3GS himself but saving a spot in line for his friend who has the first generation iPhone. "But for the kid who's getting it, it's a big deal -- he's going from 2G to 3G." Continued...
Source: Reuters

AIG worried about retirement bonus plan: Greenberg

AIG worried about retirement bonus plan: Greenberg
By Lilla Zuill
NEW YORK (Reuters) - American International Group Inc had questioned for years a retirement bonus plan for top managers because it was funded by a private company at no cost to AIG and that may have violated good governance standards, AIG's former CEO Maurice "Hank" Greenberg testified on Thursday.
Greenberg said that AIG and privately held Starr International had had a public-private partnership for 35 years, but it became strained over time as Greenberg's relationship with AIG became more contentious because of an investigation into AIG's accounting practices.
Greenberg, who grew AIG into the world's largest insurer, was ousted from AIG in March 2005. He remained chairman of Starr, which held AIG stock. Until the U.S. government bailed out AIG last September, Starr was AIG's largest shareholder.
The AIG shares that Starr held were given to AIG managers through the retirement bonus plan.
"It was unlikely that the board would want to continue the plan unless they controlled Starr International, which was intolerable in the view of (Starr) voting shareholders," Greenberg testified before U.S. District Judge Jed Rakoff.
AIG contends that Starr had pledged to fund the compensation plan in perpetuity. Starr has said it always intended its assets for a charitable trust.
AIG sued Starr to reclaim proceeds of stock sales and wrest back another 185 million shares, with the intention of bringing funding for the retirement plan in-house.
Greenberg, 84, was questioned by AIG's lawyer Ted Wells, who told the court that since 2005 Starr had reaped $4.3 billion from the sale of AIG stock.
Looking drawn during his third consecutive day of testimony, Greenberg said he had discussed the fate of the compensation scheme with AIG's board. "The last year or two of my role at AIG it began to get more heated," and likely the program would be terminated, he testified.
AIG, which lost its position as the world's leading insurer after the U.S. government's $180 billion bailout, has said that it would use any award from the trial to repay bailout debt.
Judge Rakoff ruled on Monday that investigations surrounding Greenberg's ouster, the U.S. government's bailout and controversial bonuses to AIG executives could not be raised in the trial because they were irrelevant to the case.
AIG is arguing that there was an oral contract to fund the deferred compensation scheme in perpetuity based on Greenberg's speeches, interviews and meeting minutes in which he spoke of holding the shares for the benefit of "future generations."
Under cross-examination on Thursday by his lawyer David Boies, Greenberg said there had been no mention of a trust or protection of any kind for AIG.
Greenberg, joined in court by his wife Corinne and two of his sons, Jeff and Lawrence Scott, is expected to take the stand again on Friday.
The case is: American International Group v Starr International Company Inc 05-6283 in U.S. District Court for the Southern District of New York (Manhattan).
(Reporting by Lilla Zuilll; Editing by Toni Reinhold)

Source: Reuters

Former HealthSouth boss found liable for $2.9 billion

Former HealthSouth boss found liable for $2.9 billion
By Melinda Dickinson
BIRMINGHAM, Alabama (Reuters) - Former HealthSouth Corp boss Richard Scrushy was ordered to pay $2.9 billion on Thursday after a judge found him responsible for an accounting fraud that nearly brought down the hospital chain.
Scrushy, serving a seven-year prison term in a bribery case, was acquitted of criminal charges related to the massive HealthSouth fraud in 2005.
But an Alabama state judge ruled in favor of investors in a civil lawsuit, finding that Scrushy played a key role in the accounting manipulation.
"Scrushy knew of and actively participated in fraud," state court Judge Allwin Horn said in a written ruling.
The former chief executive, 56, was "very disappointed" by the ruling and will appeal, said his attorney Jack McNamee.
"Scrushy is paying a debt to society that he does not owe. This is not the end but the beginning," McNamee said.
Last month, Scrushy came to the Jefferson County Circuit Court in leg shackles to testify in the case that was heard by a judge without a jury.
He claimed to have been duped by subordinates and said he had no knowledge of financial problems at HealthSouth.
Judge Horn rejected that argument, which was first used during Scrushy's criminal trial in 2005. It is unclear how much of the judgment Scrushy could ultimately have to pay.
John Haley, a lawyer for the shareholder plaintiffs, said Scrushy's net worth was estimated at about $275 million in 2005. Since then, Scrushy has agreed to pay $81 million to settle U.S. Securities and Exchange Commission charges that he directed the fraud, without admitting any wrongdoing.
"He is still worth a substantial amount of money," said Haley, of law firm Hare Wynn Newell & Newton in Birmingham.
The shareholders' case was brought on behalf of the company, which said in a statement that it was pleased "justice has been served." HealthSouth said it would get about 40 percent of any amounts recovered from the lawsuit.
"Although we do not at this time know whether and to what extent the judgment against Mr. Scrushy is collectible, we will pursue collection aggressively," HealthSouth said.
Its shares closed up 4 percent at $13.01 on the New York Stock Exchange.
Scrushy founded HealthSouth in 1984 and built it into a large rehabilitation medical company. Known for a lavish lifestyle and his role as a Christian minister, he was accused of directing HealthSouth to overstate revenues by at least $2.6 billion between 1996 and 2002. Continued...
Source: Reuters

Regulatory, investor demands to favor hedge M&A

By Martin de Sa'Pinto
MONACO (Reuters) - After years of unprecedented growth in the hedge fund industry, tough market conditions and investor defections are pushing some funds into closure while others may be forced to merge to survive, industry experts say.
Increased investor expectations and a higher regulatory burden will have the greatest impact on smaller funds, whose only source of income this year is likely to be a management fee of one or two percent of assets.
"I think there will be a number of managers in the alternative space which will not survive," Stephen Zimmerman, Newsmith Asset Management said at the GAIM conference this week, adding some previously viable funds risked being swamped by rising costs.
Many factors are driving these costs, with investors asking for ever more detail on how funds are managed, and asking for processes that are transparent and comprehensive. Business costs are rising and many smaller funds may be unable to afford them, Randall Dillard of Liongate told Reuters.
At the same time, fund management companies could see income fall as management fees are taken off a reduced asset base, while performance fees remain in limbo until funds recoup last year's losses and investors negotiate lower fees.
In other times management companies might have sought to raise money via a public offering, but in a tough economic climate investor appetite may be weak. The only option to closure may be to merge funds in order to obtain critical mass.
"It's unlikely we'll see a sudden rush of hedge funds going to the public market. I think there'll be attrition and some consolidation," said Peter Clarke, chief executive of Man Group MAN.L.
For Kevin Pakenham, managing director of investment banking at Jefferies International, the issue is less clear cut. "(Consolidation is) fine in theory but much more difficult in practice because of uncertainties about valuation," he said.
Even so, if regulators impose requirements for more extensive reporting and tighter risk management systems, something that has been mooted in both the European Union and the United States, the processes of consolidation and attrition may be accelerated.
Surprisingly, the largest fund managers have not raised their voices in protest, and some may secretly welcome tighter regulation, which could make high-performing smaller funds an easy target.
"The largest hedge funds aren't opposing regulation, they're encouraging it," Pierre-Paul Benoit, chief executive of SocGen spinoff Aldea Capital, told Reuters on Thursday. "They see it as a barrier to entry, and it could also allow them to pick off the best emerging managers cheaply."
(Additional reporting from Laurence Fletcher; Editing by Andrew Macdonald)
(To read the Reuters Hedge Fund Blog click on blogs.reuters.com/hedgehub; for the Global Investing Blog click here)

Source: Reuters

Airplane makers woo suppliers at Air Show

Airplane makers woo suppliers at Air Show
PARIS (Reuters) - Airplane makers plan to crank up production volumes as soon as the global economic crisis starts easing, and they are using this year's Paris Air Show to convince suppliers that they can sell as many planes as planned.
Airplane makers including EADS (EAD.PA) unit Airbus and U.S. rival Boeing (BA.N) have cut production this year after some customers canceled or delayed their orders for new airplanes.
Suppliers still worry that delivery goals for this year are too optimistic and are reluctant to build up large inventories, threatening to scupper planemakers' plans to ramp up output again as soon as the global economy starts recovering.
"We will use this year's Le Bourget (Paris Air Show) to have particularly intense discussions with suppliers," Airbus Chief Executive Tom Enders told journalists before the start of the world's largest air show.
"Otherwise they start to make their own assumptions about deliveries and come up with production rates that are not in synch with our plan.
The fragility of an increasingly global supply chain was highlighted in 2007 when Boeing was forced to postpone deliveries of its 787 Dreamliner due to a shortage of bolts.
The plane is expected to fly this year, almost two years later than planned, after the company pushed back its delivery schedule several times due to production delays, risking order cancellations by angry airlines.
Now suppliers are telling airplane makers they will "make just-in-time (supply) your problem, not our problem," said Richard Aboulafia, vice president at U.S. aerospace and defense consultancy Teal Group, at the Paris Air Show on Thursday.
MANAGING EXPECTATIONS
MTU Aero Engines (MTXGn.DE), which makes civil and military aircraft engines, is also in talks with suppliers to ensure it can keep up with increasing airplane production once economic conditions start improving.
"We have to be careful when business goes up again that suppliers will be able to deliver," MTU Aero Engines' Chief Executive Egon Behle said.
Airbus's Enders said his company tries to communicate planned production changes to suppliers as early as possible so that they can build up enough inventory in anticipation of demand for parts when they are needed for planes.
A poll found earlier this year that airlines, civil plane makers' biggest customers, saw deliveries of Airbus's A380 superjumbos falling short of a target of 18. Airbus said at the time it could reach its target but has since cut it to 14.
The A380 has a list price of $327.5 million, and as customers pay when they receive the airplane, the impact of fewer deliveries this year will have a significant impact on EADS's revenues.
BHF Bank analyst Nils Machemehl said on Thursday he expected Airbus to fall short of its overall deliveries target of 483 airplanes for this year, estimating deliveries at 461 planes.
"There are uncertainties as to whether the financing remains in place" for 2009 deliveries, he said. So far, Airbus has said financing is in place for all planes to be handed over to customers this year.

Source: Reuters
 

Business

Politics

Incidents

 

Society

Sport

Culture