State Bankruptcy Concept May Be Losing Steam

   By Andrew Thomason - (ISN) - 1/30/2011 - Should states be allowed to declare bankruptcy much the way businesses can?
   It’s an idea that’s been floating around Washington, D.C., lately as more states find themselves in financial holes.
   In several reports by national media, Illinois has been used as an example of a state that could use a bankruptcy option because of its billions-dollar deficit.
   But there are constitutional hurdles that would be hard to overcome, according to Douglas Baird, a law professor at the University of Illinois at Chicago.
    “A state may contract debt but, typically speaking, you can’t go to an Illinois court and sue the state of Illinois to collect the debt and you can’t go to federal court to sue a state and collect the debt because states have what’s called sovereign immunity,” Baird said.
   Bankruptcy affords individuals and businesses a way to get out from under the debt they owe and, in some cases, reorganize that debt to remain in business. States don’t need that option because of  sovereign immunity, Baird said.
   “If you’re immune from suit, then you don’t need bankruptcy because your creditors can jump up and down but they’re not going to be able to do anything because they can’t seize your assets or do stuff like that anyway,” he said.
   This immunity makes bankruptcy for states unnecessary, according to opponents of the plan.
   At least one constitutional officer in Illinois has come out against any bankruptcy plan for states. Republican Treasurer Dan Rutherford, speaking on CNBC Tuesday morning, said that states need to deal with their fiscal issues through channels already available.
   States can either raise taxes, like Illinois did recently when it increased its personal and corporate income tax rates, default, or make major cuts, Rutherford said on the broadcast. He said states facing fiscal problems must use some combination of the options available to fix the problems.
   Democratic Gov. Pat Quinn’s budget point man David Vaught, agreed, saying letting states go bankrupt is a “very, very bad idea.”
   “States don’t go bankrupt. There’s no Chapter 9 in the current bankruptcy law (for states)”, Vaught said, referring to the federal bankruptcy code that allows municipalities to reorganize debt with creditors.
   “States are sovereign states,” Vaught said. “They have unlimited taxing power. They have the ability to solve their own problems, and we don’t need this debate in Washington,” Vaught said.
   The idea of giving states bankruptcy as an avenue to deal with mounting deficits garnered attention after being mentioned by former Republican House Speaker Newt Gingrich. Many are concerned Gingrich’s plan would allow Illinois and others to change pension benefits and other services promised by the states.
   Bankruptcy is “essentially creating an avenue for states to walk away from their obligations to provide public services, to pay their bills, and to meet their commitments to their employees. That’s a dangerous recipe,”  said Anders Lindall, a spokesman for the American Federation of State, County and Municipal Employees Council 31.
   Prominent political leaders on both sides of the aisle have since come out against the plan. It seems to be losing steam and specific legislation has yet to be introduced in Congress.
   Note: Originally published on Jan. 26, 2011. Story courtesy of Illinois Statehouse News.

Repeal of Construction Plan Worries Lawmakers

   By Diane S.W. Lee and Melissa Leu - (Illinois Statehouse News) - 1/30/2011 - Illinois state construction and building projects may be in for a long haul.
   An Illinois Appellate Court on Jan. 26 threw out the state’s multi-year, $31 billion capital program, leaving local lawmakers concerned.
   In addition to funding construction projects, Public Act 96-34 legalized video gaming in certain establishments, allowed for privatization of the state’s lottery, hiked taxes on such items as beverages and candy and increased liquor taxes. The court ruled that it was “void in its entirety.”
   W. Rockwell Wirtz, president of the Chicago-based alcohol wholesaler Wirtz Beverage Illinois, brought the case to the appeals court, alleging it violated the Illinois Constitution’s single subject rule.
   The single subject rule, also called the “uniformity clause,” requires that legislation dealing with appropriations be limited to one subject.
    One Illinois lawmaker flat out disagreed with the ruling.
   “I think the courts have this wrong. It’s clearly a single subject,” Sen. Mike Jacobs, D-Moline, said. “The single subject is raising capital for the state, so the state can move forward on economic development projects.”
   Sen. Dave Syverson, R-Rockford, said “Nothing is going to change in the end. I think the court is just saying their interpretation is that we need to follow a stricter single-subject rule.”
   The capital program was a major initiative of Gov. Pat Quinn’s first year in office, aimed at creating jobs and investing in the state’s infrastructure.
   State Rep. Dan Brady, R-Bloomington, said he was disappointed with the court’s ruling on a measure he called a “jobs bill.”
   “When you now say that the funding in the legislation itself is unconstitutional, you put a choke hold on those jobs and the state and the economy,” Brady said. “This whole jobs bill … was directed to stimulate the economic engine of the state of Illinois and put people back to work in this high unemployment time.”
   The Illinois Attorney General’s office plans on filing an appeal and a motion for an immediate stay on Thursday, spokeswoman Robyn Ziegler said. A stay will allow the program to continue as usual.
   Quinn appeared to be hoping for the best.
   “We would expect the Supreme Court to rule on the request for a stay in the very near future,” Quinn said in a written statement released Wednesday.
   The Legislature now faces two options — wait for the Supreme Court’s decision or break down the measure into smaller components and pass the plan separately when both chambers reconvene on Feb. 2.
   If that doesn’t work, lawmakers will need to look for a different funding source for capital projects, Rep. Jil Tracy, R-Mt. Sterling, said.
   “There [are] challenges — because there are different players of this General Assembly — but I’ve got to believe that across party lines, and across geographic lines, and everything else, we recognize that Illinois has got a crumbling infrastructure that so desperately needs attention,” Tracy said.
   But the clock is ticking.
   “We’re anticipating a spring construction season with projects that are being funded by this capital bill,” Brady said. “And that is of great concern to me, that there is now a roadblock that has been thrown up to move forward with this very needed jobs bill in the state.”
   Capital projects already in progress are expected to continue as scheduled, which is a relief to one southern Illinois lawmaker.
   “You got a real asset,” Sen. John Jones, R-Mount Vernon, said. “The governor has some discretionary movement around here, so he can use money out of his own revenue fund to keep the capital bill moving forward.”
   Jacobs echoed that concern.
   “Clearly raising revenue is never easy,” Jacobs said.
   Note: originally published Jan. 26, 2011. Story courtesy of Illinois Statehouse News.

Analysts Say Auto Sales Off to a Steady Start

   SANTA MONICA, Calif. - (BUSINESS WIRE) - 1/29/2011 - This month's new car sales (including fleet sales) are expected to hit approximately 816,000 units, a 17.3 percent increase from January 2010 but a 28.4 percent decrease from December 2010, according to, a major online resource for automotive information.
   Retail sales are expected to total approximately 661,000 units, down from approximately 947,000 last month. analysts predict that January's Seasonally Adjusted Annualized Rate (SAAR) will be 12.57 million, up from 12.48 in December 2010. SAAR for retail sales is about 10.2 million, down slightly from last month.
    Average automaker incentives in the U.S. are estimated to be $2,516 per vehicle sold in January 2011, down $22, or 0.9 percent, from December 2010, but up $163, or 6.9 percent, from January 2010.
   “January’s sales figures continue a trend of steady, sustainable growth for the auto industry,” Senior Analyst Jessica Caldwell said. “What’s even more encouraging is that this month’s figures were less dependent on fleet sales than last year. That means 2011 is already seeing a more robust retail market supported by individual consumers.”
    January 2011 had 24 selling days, the same as last January 2010.
    “January is typically the worst sales month of the calendar year, so this is an impressive jumping off point for 2011,” added Caldwell. “Because this year’s January baseline is so much higher than the last two years, carmakers can be reasonably optimistic that this growth can continue.”
    The combined monthly U.S. market share for Chrysler, Ford and General Motors (GM) domestic nameplates is estimated to be 44.8 percent in January 2011, down from 45.6 percent in January 2010, and the same as December 2010. predicts Chrysler will sell 74,300 units in January 2011, up 31.6 percent compared to January 2010 but down 25.6 percent from December 2010. This would result in a new car market share of 9.1 percent for Chrysler in January 2010, up from 8.1 percent in January 2010 and up from 8.8 percent as in December 2010.
    Ford is predicted to sell 129,000 units in January 2011, up 12.8 percent compared to January 2010 but down 30.9 percent from December 2010. This would result in a new car market share of 15.8 percent of new car sales in January 2011 for Ford, down from 16.5 percent in January 2010 and down from 16.4 percent in December 2010.
    GM will sell 162,600 units in January, analysts predict, up 11.1 percent compared to January 2010 but down 27.4 percent from December 2010. GM's market share is expected to be 19.9 percent of new vehicle sales in January 2011, down from 21.0 percent in January 2010 but up from 19.7 percent in December 2010.
    Honda is predicted to sell 81,800 units this January, up 21.3 percent from January 2010 but down 36.9 percent from December 2010. Honda’s market share is expected to be 10.0 percent in January 2011, up from 9.7 percent in January 2010 but down from 11.4 percent in December 2010. predicts Nissan will sell 71,900 units in January 2011, up 15.0 percent from January 2010 but down 23.2 percent from December 2010. Nissan's market share is expected to be 8.8 percent in January 2011, down from 9.0 percent in January 2010 but up from 8.2 percent in December 2010.
    Finally analysts predict that Toyota will sell 117,400 units in January 2011, up 18.8 percent from January 2010 but down 33.8 percent from December 2010. Toyota's market share is expected to be 14.4 percent in January 2011, up from 14.2 percent in January 2010 but down from 15.6 percent in December 2010.

Crisis Commission Cites Culprits Behind Meltdown

1/27/2011 - Financial Crisis Inquiry Commission says crisis was avoidable, issues comprehensive, 500-plus page report. Details of the report and a copy can be obtained here:

Refinery to Pay More Than $5.3 Million Penalty

   WASHINGTON - 1/26/2011 - The U.S. Environmental Protection Agency (EPA) and the U.S. Department of Justice announced on Jan. 26 that Hovensa LLC, owner of the second largest petroleum refinery in the United States, has agreed to pay a civil penalty of more than $5.3 million and spend more than $700 million in new pollution controls that will help protect public health and resolve Clean Air Act violations at its St. Croix, U.S. Virgin Islands refinery.
   The settlement requires new and upgraded pollution controls, more stringent emission limits, and aggressive monitoring, leak-detection and repair practices to reduce emissions from refinery equipment and process units.
    “This settlement will produce significant benefits for the environment and for the people of the Virgin Islands,” said Cynthia Giles, assistant administrator of EPA’s Office of Enforcement and Compliance Assurance. “The commitments made by Hovensa to install state-of-the-art pollution controls will mean cleaner air for years to come.”
   The government’s complaint, filed concurrently with today’s settlement, alleged that the company made modifications to its refinery that increased emissions without first obtaining pre-construction permits and installing required pollution control equipment. The Clean Air Act requires major sources of air pollution to obtain such permits before making changes that would result in a significant emissions increase of any pollutant.
    Once fully implemented, the pollution controls required by the settlement are estimated to reduce emissions of nitrogen oxides (NOx) by more than 5,000 tons per year and sulfur dioxide (SO2) by nearly 3,500 tons per year. The settlement will also result in additional reductions of volatile organic compounds, particulate matter, carbon monoxide and other pollutants that affect air quality. Additional pollution-reducing projects at the refinery’s coking unit under the settlement will also reduce greenhouse gas emissions by over 6,100 tons per year.
    High concentrations of SO2 and NOx, two key pollutants emitted from refineries, can have adverse impacts on human health, and are significant contributors to acid rain, smog, and haze.
   “This important settlement with the second largest refinery in the United States will result in significant improvements to human health and the environment of the United States Virgin Islands,” said Ignacia S. Moreno, assistant attorney general for the Environment and Natural Resources Division of the Department of Justice. “Because of this settlement, Hovensa will install advanced pollution control and monitoring technology, will adopt more stringent emissions limits, and will also create a fund dedicated to local environmental projects. This is another major step in our efforts, alongside EPA, to bring the petroleum refining sector into compliance with our nation’s environmental laws.”
    The government of the U.S. Virgin Islands has joined in the settlement and will receive a portion of the civil penalty. In addition, the company will set aside nearly $4.9 million for projects to benefit the environment of the U.S. Virgin Islands. The projects will be identified jointly by the U.S. Virgin Islands government and Hovensa, in consultation with EPA.
    The settlement with Hovensa is the 28th under an EPA initiative to improve compliance among petroleum refiners and to reduce significant amounts of air pollution from refineries nationwide through comprehensive, company-wide enforcement settlements. The first of EPA’s settlements was reached in 2000, and with today’s settlement, 105 refineries operating in 32 states and territories – more than 90 percent of the total refining capacity in the United States – are under judicially enforceable agreements to significantly reduce emissions of pollutants. As a result of the settlement agreements, refiners have agreed to invest about $6 billion in new pollution controls designed to reduce emissions of sulfur dioxide, nitrogen dioxide and other pollutants by over 360,000 tons per year.
    Hovensa is one of the 10 largest refineries in the world and has the capacity to refine more than 525,000 barrels of crude oil per day.
    The consent decree, lodged in the District Court of the Virgin Islands, is subject to a 30-day public comment period and court approval.

Machinists Union Sues South Carolina Governor

   WASHINGTON - (BUSINESS WIRE) - 1/23/2011 - The International Association of Machinists and Aerospace Workers (IAM) is suing South Carolina’s new Republican governor over her pledge to use state resources to deprive South Carolina citizens of rights guaranteed by federal labor law and the 1st and 14th amendments of the U.S. Constitution.
   The suit, filed today in U.S. District Court in Charleston, SC, charges Republican Gov. Nikki Haley with violating the federal constitutional and statutory rights to free speech, free association and due process by establishing a State governmental policy of hostility to unions and workers seeking to join unions.
   The IAM and the South Carolina AFL-CIO filed the suit under 42 U.S.C. § 1983, which prohibits state officials from acting in a way that deprives citizens of Federally-protected rights. The IAM suit also names Catherine Templeton as a co-defendant. Templeton is Gov. Haley’s pick to head South Carolina’s Department of Labor, Licensing and Regulation.
    “Gov. Haley placed her hand on a bible and swore to defend the Constitution of the United States,” said IAM Southern Territory Vice President Bob Martinez. “But her stated intention is to actively oppose workers in South Carolina who wish to exercise their legal right to join a union. There is nothing in the governor’s oath of office that gives her the right to choose which laws to enforce and which to ignore.”
    On December 8, 2010, Governor Haley announced she would nominate union avoidance attorney Catherine Templeton to head South Carolina’s Department of Labor, Licensing and Regulation (LLR), declaring unequivocally, “We’re going to fight the unions and I needed a partner to help me do it.”
    “By tasking Ms Templeton to lead the fight against union organizing in South Carolina, and specifically against the IAM at the Boeing facility in North Charleston, Gov. Haley is requesting a state official to violate the very law she is charged with enforcing,” said Martinez. “The state has no business whatsoever taking sides or exerting influence in a worker’s decision to join or not to join a union.”
Full text of the lawsuit is available here.
   The IAM represents more than 30,000 Boeing workers and is among the largest industrial trade unions in North America, with nearly 700,000 active and retired members in dozens of industries. For more information about the IAM, visit

Wisconsin works to poach Illinois businesses

               By Andrew Thomason
             Illinois Statehouse News
   SPRINGFIELD - 1/22/11 - Leaders in neighboring states have used Illinois’ recent income tax increase to try to lure businesses into moving, and Wisconsin could soon have another piece of bait in that battle: tax breaks.
   A plan to forgive income taxes for two years for businesses that move to Illinois’ northern neighbor has passed through one chamber of Wisconsin’s Legislature and is now awaiting state Senate approval.
   The measure got overwhelming approval in Wisconsin’s Republican-controlled state Assembly, and could be passed out of the Republican-controlled state Senate as early as next week. It would then go to GOP Gov. Scott Walker, who campaigned on corporate income tax breaks.
   “It’s like when you see these rental properties that might have a bunch of empty units and offers the first month’s rent free if you sign a lease with us. It’s the same concept,” Walker spokesman Cullen Werwie said.
   He added that while this was in the works even before Walker was elected, it does gain extra relevance because of the tax increase recently approved in Illinois.
   Walker has been vocal about trying to drive companies out of Illinois and into his state since the income tax hike, but at least one Wisconsin business isn’t listening.
   Jim Rozell owns a hotel analytics company and plans to relocate from Glendale, Wisc., to Chicago by the end of the year. Hotel Compete currently has five employees, but Rozell said he will likely hire 10 more people once he comes to Illinois.
   Rozell said he started planning the move before taxes went up Illinois, but hearing about it didn’t deter him.
   “Initially one of my big deciding factors was that taxes were much lower (in Illinois). Even with your tax increase, it’s still lower than Wisconsin,” Rozell said.
   Illinois Gov. Pat Quinn has emphasized that money from the higher taxes is necessary to fix a structural deficit that has made the state a national illustration of what not to do fiscally.
   “Illinois is focused on putting our financial house in order, making us a stronger environment for business and that is what Gov. Quinn is focused on,” Quinn spokeswoman Brienne Callahan said.
   “We’re focused on us and doing the right things for Illinois and bringing businesses to Illinois and making us a stronger competitor.”
  Quinn’s office has been working to counter claims by Walker and opponents of the tax increase in Illinois that employers will flee the state now.
   Earlier in the week it was announced that a Evraz Inc., a steel company, will locate its North American headquarters in Chicago, bringing with it 70 jobs.
   “Illinois continues making great strides toward economic recovery. Evraz’s decision to move here is one more indication that our business climate and our work force are attractive to major national and international corporations,” Quinn said in a news release.
   And Quinn’s office even announced that Illinois would be doing some business poaching of its own. A news release sent out Friday afternoon stated that Becker Iron & Metal, a scrap metal company, would be moving from Missouri to Illinois, bringing with it 40 jobs.
   Story courtesy of Illinois Statehouse News.

Two Plead Guilty in $5.2 Million Medicare Scheme

   WASHINGTON -  1/21/2011 - Two owners of a Houston health care company pled guilty Jan. 20  in connection with an alleged $5.2 million Medicare fraud scheme, announced the Departments of Justice and Health and Human Services (HHS).
   Clifford Ubani, 52, and Princewill Njoku, 51, each pled guilty before U.S. District Court Judge Nancy Atlas in Houston to one count of conspiracy to commit health care fraud, one count of conspiracy to pay kickbacks and 16 counts of payment of kickbacks to Medicare beneficiary recruiters.
   According to court documents, Ubani and Njoku were owners and operators of Family Healthcare Group (Family Group), a home health care company. Family Group purported to provide skilled nursing to Medicare beneficiaries. According to court documents, Ubani and Njoku hired co-conspirators to recruit Medicare beneficiaries for the purpose of filing claims with Medicare for skilled nursing that was medically unnecessary and/or not provided. Ubani and Njoku admitted that they paid kickbacks to the recruiters for their referrals.
   Ubani and Njoku previously pled guilty to conspiracy to commit health care fraud related to their ownership of another Houston health care company, Family Healthcare Services (Family Services). Family Services submitted approximately $1.1 million in fraudulent claims to Medicare for the costs of durable medical equipment.
   At sentencing, scheduled for July 19, 2011, Ubani and Njoku each face a maximum sentence of 10 years in prison for each health care fraud conspiracy count, five years in prison for each kickback conspiracy count and five years in prison for each kickback count.
   Today’s guilty pleas were announced by Assistant Attorney General of the Criminal Division Lanny A. Breuer; U.S. Attorney José Angel Moreno of the Southern District of Texas; Special Agent-in-Charge Richard C. Powers of the FBI’s Houston Field Office; Special Agent-in-Charge Mike Fields of the Dallas Regional Office of HHS Office of Inspector General (HHS-OIG), Office of Investigations; and Texas Attorney General Greg Abbott.
   This case is being prosecuted by Trial Attorneys Charles D. Reed and Laura Cordova, and Assistant Chief Sam S. Sheldon of the Criminal Division’s Fraud Section. The case was brought as part of the Medicare Fraud Strike Force, supervised by the U.S. Attorney’s Office for the Southern District of Texas and the Criminal Division’s Fraud Section.
  Source: U.S. Department of Justice. For further information, visit:

Fed: Company Sold $670,000 in Fraudulent Bonds

Reinsurance company, executives face multiple-count indictment
  RICHMOND, Va. – 1/20/2011 - The president and the auditor of a Costa Rican company selling reinsurance bonds to life settlement companies were arrested and charged, along with the company itself, in a seven-count indictment unsealed on Jan. 19 for their alleged role in a $670 million fraud scheme involving victims throughout the United States and abroad.
   The indictment charges Costa Rica-based Provident Capital Indemnity Ltd. (PCI), Minor Vargas Calvo, 59, and Jorge Castillo, 55, each with one count of conspiracy to commit mail and wire fraud, three counts of mail fraud and three counts of wire fraud. It also seeks forfeiture of more than $40 million from all three defendants. Vargas was arrested on Jan. 18, 2011, at the John F. Kennedy International Airport, and Castillo was arrested on Jan. 19 in New Jersey.
   Charges were announced by U.S. Attorney for the Eastern District of Virginia Neil H. MacBride and Assistant Attorney General Lanny A. Breuer of the Criminal Division.
   “PCI is accused of lying to investors across the globe to sell more than half a billion dollars worth of ‘guaranteed’ bonds which turned out to be worthless,” MacBride said.
   According to the indictment, Vargas, a citizen and resident of Costa Rica, is the president and majority owner of PCI, an insurance and reinsurance company registered in the Commonwealth of Dominica and doing business in Costa Rica. Castillo, a resident of New Jersey, is the purported independent auditor for PCI. If convicted, Vargas and Castillo face up to 20 years in prison on each count.
   The defendants allegedly engaged in a scheme to defraud clients and investors by making misrepresentations about PCI’s reinsurers, PCI’s financial statements and PCI’s Dun and Bradstreet rating, in connection with PCI’s marketing and sale of “financial guarantee bonds” to companies that sold life settlements or securities backed by life settlements to investors.
   PCI’s bonds were allegedly marketed as a way to eliminate one of the primary risks of investing in life settlements, namely the possibility that the individual insured by the underlying life insurance policy will live beyond his or her life expectancy.
   “This case is another example of how the members of the Virginia Financial and Securities Fraud Task Force are working to detect, deter and punish financial fraudsters who target investors throughout Virginia, the nation and the world.”
   “These defendants allegedly sold $670 million in bonds by making numerous false representations, which were disseminated to thousands of investors. They stand accused of defrauding victims at home and abroad.
  As these charges show, the Justice Department is committed to rooting out investment fraud wherever we find it,” Breuer said.
   The indictment alleges that from 2004 through 2010, PCI sold approximately $670 million of bonds to life settlement investment companies located in various countries, including the United States, the Netherlands, Germany, Canada and elsewhere. PCI’s clients, in turn, sold investment offerings backed by PCI’s bonds to thousands of investors around the world. Purchasers of PCI’s bonds were allegedly required to pay up-front payments of 6 to 11 percent of the underlying settlement as “premium” payments to PCI before the company would issue the bonds.
   This continuing investigation is being conducted by the U.S. Postal Inspection Service, Internal Revenue Service and FBI, with assistance from the Virginia State Corporation Commission, the Texas State Securities Board, and the New Jersey Bureau of Securities. This case is being prosecuted by Assistant U.S. Attorneys Michael S. Dry and Jessica A. Brumberg of the Eastern District of Virginia and Trial Attorney Albert B. Stieglitz Jr. of the Criminal Division’s Fraud Section.
   In a parallel investigation, the U.S. Securities and Exchange Commission announced its filing on Jan. 19 of a parallel emergency enforcement action against PCI, Vargas and Castillo.
   An indictment is a formal accusation of criminal conduct, not evidence. A defendant is presumed innocent unless and until convicted through due process of law.
   The investigation has been coordinated by the Virginia Financial and Securities Fraud Task Force.

Trader Charged with Threatening to Kill Officials

    By Steve Rensberry
   (RPC) - 1/18/2011 - Asset manager and commodities trader Vincent P. McCrudden of Dix Hills, NY, was charged on Jan. 14 with threatening to kill 47 U.S. officials, each of whom held various responsibilities in the regulation of the financial industry.
   Agents apprehended McCrudden at Newark Liberty Airport in Singapore. He is being represented by defense attorney Bruce Barket and is being held without bail.
   McCrudden, who had been living in Singapore, is a 20-year veteran of Wall Street and CEO of Alnbri Management, LLC, of Long Beach, New York.
   Threats were alleged to have been made via e-mail against numerous active and former officials with the U.S. Securities and Exchange Commission, the National Futures Association, The U.S. Commodities Futures Trading Commission and the Financial Industry Regulatory Authority.
   According to a summary of the case released by the U.S. Department of Justice, McCrudden, 49, faces two counts of transmitting death threats, each of which carries a maximum prison sentence of five years.
   In one instance McCrudden is alleged to have stated in an e-mail sent to an NFA employee that "it wasn't ever a question of 'if' I was going to kill you, it was just a question of when. And now, that question has been answered. You are going to die a painful death."
   McCrudden also posted threats on a website under his control, urging people to "buy a gun and take back the country," the DOJ announcement said.
   "On another page on his website, the defendant included and 'Execution List' with the names of 47 current and former officials of the SEC, FINRA, NFA, and CFTC. That list included the chairperson of the SEC, the chairman of the CFTC, a former acting chairman and commissioner of the CFTC, the chairman and CEO of FINRA, the former chief of enforcement at FINRA, and other employees of the NFA and CFTC."
   Furthermore, McCrudden upped the ante by offering a reward of $100,000 to anyone who could supply personal information about such officials and proof of their punishment.
  The complain alleges that McCrudden began his threats not long after the CFTC filed a civil enforcement suit in early December, 2010, the latest in a string of disciplinary actions by regulatory agencies over many years.
   Business Insider has reported on a number of McCrudden's alleged threats here, in particular those made against Dan Driscoll of the National Futures Association.
   The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; Lanny A. Breuer, Assistant Attorney General of the Criminal Division, United States Department of Justice; and Janice K. Fedarcyk, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.
    Lynch stressed the importance of the government's case.
   "In this day and age, there is no such thing as an idle threat. Those who threaten injury or worse to the lives of others will be promptly investigated and vigorously prosecuted," Lynch said.
   The website of Alnbri Management, LLC says that McCrudden has two children and is a former soccer player with the University of Rhode Island and at one time played professionally for the Tampa Bay Rowdies and the Minnesota Strikers, in addition to being an amateur boxer and having raised money for slain and disabled officers with the New York Police Department.
   But the site also contains this statement:
   "Mr. McCrudden has spent the past 13 years and counting combating a colluded Government attempt to discredit and harass Mr. McCrudden through repeated bogus procedures. Mr. McCrudden has sought relief by suing multiple agencies and officials for $1 Billion. But this has not stopped certain higher ranking officials because they know that Judges are Government employees too. In order to stop the libel, slander and harrassment at the hands of these entities, and with no available forum in the US justice system, Mr. McCrudden has started a process to enact payback for years of Government abuse." See: Alnbri Management.
   According to the site, McCrudden claims to be a two-time survivor of the World Trade Center bombings and to have lost 23 friends in the tragedy.
   "Wake up my fellow citizens and middle class and go look into the mirror, because you my friends are the face of the new Al Qaeda! Civil disobedience can be a start for justice. Its us (middle class) against them (Government officials and the Bourgeosie). Start acting now before its too late!" the site says.

2010 Called 'Wonderful Year' for Energy Investors

   NORWALK, Conn.- (BUSINESS WIRE) - 1/13/2011 - Despite a poor start, 2010 finished as a “wonderful year” for energy investors, with more than 65 percent of oil and gas stocks delivering positive returns last year, according to the IHS Herold 2010 Energy Peer Group Stock Market Performance Report, which was just released by information and insight provider IHS.
   Driven by economic growth, crude prices, which hit bottom in late May 2010 at around $65 per barrel, rose steadily and consistently through the second half of the year, and took oil company shares with them.
   The median gain for the 503 stocks covered in the report was 21 percent, which, while it did not match the record-setting 59 percent gain posted in the 2009 IHS report, did outperform the market indices of nearly all Organization for Economic Cooperation and Development (OECD) countries. Total capitalization jumped by more than $300 billion, further reducing the severe losses the sector incurred in 2008 the report said, but did not extinguish them.
   “Sometime in the first quarter of 2009, equity markets began to move upward in response to the economic growth that was becoming apparent in OECD countries,” said Robert Gillon, senior vice president and co-director of energy equity research at IHS. “It seemed as though every statistic that confirmed expansion was under way was reflected in a rise in the price of crude, which boded well for oil stocks. That pattern continued throughout the year, with oil prices and oil shares at a recovery high at the closing bell of 2010. In particular, North American oil stocks delivered the most returns to their investors.”
    After finishing second-to-last as a peer group in 2009, U.S. Royalty Trusts earned redemption by taking top honors in 2010 as the best performing peer group reviewed, posting a gain of more than 44 percent. MV Oil Trust led the group by posting a return of 111 percent.
    Companies in the E&P Limited Income Partnerships group followed closely with gains of nearly 43 percent. According to the IHS report, these survey-leading returns were in response to monetary stimuli by numerous central banks, where open-market interest rates fell to the lowest levels seen in decades, which forced yield-conscious investors to take on more risk in order to maintain their desired level of income.
    “The vast amount of liquidity being injected into the economic system, particularly in the U.S. has resulted in a strong correlation between equity prices and oil prices,” Gillon noted. “By contrast, for many years prior to 2009, there was a reverse relationship, with higher crude prices perceived to cause a reduction in disposable income, lower consumer spending, and declining domestic product and stock prices. To our mind, this is the normal state of affairs, but to predict we will be back to normal in short order would be unwise.”
    Mid-sized U.S. E&Ps, led by McMoRan Exploration Company, generated a segment return of nearly 42 percent, outperforming every other group of oil and gas producers globally. McMoRan delivered a total return in 2010 of nearly 114 percent.
    As a group, Master Limited Partnerships — mostly pipeline and storage companies — enjoyed a hearty gain of nearly 35 percent, while the peer group of Integrated Oil Stocks with U.S. Downstream returned 22 percent, which was marginally above the survey average. Canadian Integrated Oil Stocks and Integrated Oil Stocks without U.S. Downstream Operations gained less than half that amount, at 10 percent and nine percent, respectively. Returns from the latter group, the report said, were dragged down by the generally poor performance of European markets. On the other hand, shares in the Refining and Marketing category offered a healthy median gain of 38 percent and did well globally as demand for distillates rose with increasing economic activity.
    EnCore Oil plc of the U.K., whose shares rocketed by 773 percent following the discovery of the Catcher field in the U.K. sector of the North Sea, was the runaway leader of the Smaller E&P Companies Outside North America, but among companies starting at more than $0.50 per share, Xcite Energy Ltd. of the U.K. stole top survey honors for best total return of 552 percent due to its North Sea heavy oil project. Notably, Xcite Energy was also the top performer in last year’s survey.
    Pacific Rubiales Energy enjoyed splendid results with its heavy oil development program in Colombia, and the sizzling gain of 131 percent placed the company at the top of the list of Largest Oil and Gas Producers for a second year in a row. CNOOC Ltd. maintained the title of largest capitalization amongst the Largest Oil and Gas Producers by a very wide margin. The Chinese producer, which had a steaming 56 percent total return, is the first in this sector to have its market valued exceed $100 billion.
    Amongst the Largest Integrated and Diversified Oils, top-ranked Ecopetrol’s 84 percent gain reflected rapidly growing oil production, and it also got an updraft from the soaring Bogota market. Sunoco Inc. and Valero Energy, last year’s bottom two performers in the Largest Integrated and Diversified Oils group, moved into the top 10 due to a dramatic turnaround in refining margins. BHP Billiton is the only member of the 2009 crop to repeat in the top 10 this year.
    In a stunning turnaround, nine of last year’s top 10 finishers fell to the bottom half of the table in 2010, with Petroleo Brasileiro and Rosneft Oil, numbers one and two in the previous ranking, being hit particularly hard.
   Thanks in part to the Greek financial crisis, European markets were among the worst-performing financial exchanges and companies there had a tough 12 months, the report noted. Eni, Spa and Husky Energy repeated in the group’s bottom 10. BP p.l.c., as anticipated following the Deepwater Horizon incident, suffered through a horrendous year and now ranks eighth by capitalization, down from second in 2005.
    While oil stocks carried the sector in 2010, continued weakness in the North American natural gas market did not prevent the large producers from generating solid shareholder returns, with the median performance of the group nearly matching that of the entire survey. However, a high concentration of North American natural gas in the production mix detracted from returns, since U.S. natural gas spot prices, which began the year at what now seems like the lofty price of $6/MMBtu, ended the year at a nine-year low for the date, which was about 30 percent below where they began. This led to the denouement of Southwestern Energy, which had been a stellar performer in the previous three years, the report said.
    “Natural gas inventories were well above average and U.S. domestic production showed no signs of topping out,” Gillon added. “Fortunately for everyone but the Europeans, it has been ferociously cold in Europe, so gas is being shipped to the higher priced markets. The world is well supplied with gas, and the modest upward slope to the current futures curve is testimony to the glut in supply.”
    Stocks in the Alternative Energy group held the basement position as worst in class, posting losses of more than 24 percent after gaining 26 percent in 2009. Said Gillon, “We’re not sure what to say about alternative energy, except perhaps a requiem. In the five years we have shown this segment in the survey, it has been the worst performing group twice, second worst twice, and soared to fourth from the bottom on one happy occasion. They suffer when natural gas prices go down, when government subsidies are cut, when the wind doesn’t blow, when it blows too much, and when the sun doesn’t shine. There may be other problems as well, which we will probably find out about in 2011.”
   See: IHS Herold

EPA Proposes $17M Settlement with 275 Parties

   SAN FRANCISCO – 1/11/2011 – The US Environmental Protection Agency’s Pacific Southwest Region is proposing to enter into settlements with 275 small parties, called de minimis parties, for the Operating Industries, Inc. (OII), Superfund Site. The OII Site is a 190-acre facility located in Monterey Park, Calif., about 10 miles east of downtown Los Angeles.
   The OII Site was operated as a landfill accepting commercial, residential, and industrial waste from 1948 to 1984. Each of the de minimis parties sent between 4,200 and 110,000 gallons of liquid hazardous waste to the OII Site during its decades of operation. Collectively, these parties will pay more than $17 million toward cleanup costs at the site.
    “Today, landfills that accept hazardous waste must meet very strict design requirements. This was not the case with OII where hazardous materials were released into the environment,” Regional Administrator for EPA’s Pacific Southwest Region Jared Blumenfeld said. “Including this settlement, 1,100 companies responsible for the contamination have contributed more than $600 million to the cleanup of the OII Superfund site.”
   Over the course of its operation, the landfill accepted industrial solid, liquid and hazardous wastes, as well as municipal solid waste. The EPA identified the OII Site as an environmental problem in the early 1980s and placed it on the National Priorities List in 1986.
   Notice of the proposed Administrative Settlement Agreement and Order on Consent was placed into the Federal Register for a thirty day public comment period beginning January 7, 2011.
   Source: U.S. EPA  See also:

NASA Employee Charged With Illegal Shipping

   WASHINGTON — 1/10/2011 — An Ohio man was charged with illegally shipping infrared military technology to South Korea, the Department of Justice announced on Jan. 10
   A criminal information was filed charging Kue Sang Chun, 66, of Avon Lake, Ohio, with one count of exporting defense articles on the U.S. Munitions List without first obtaining an export license or written authorization from the U.S. Department of State, and one count of knowingly making and subscribing a false U.S. individual income tax return.
   Chun is a longtime employee at the NASA Glenn Research Center, though he is not accused of taking technology or related materials from the research center.
   According to count one of the information, between March 2000 and November 2005, Kue Sang Chun knowingly exported and caused the export from the United States to the Republic of Korea (South Korea) of Infra Red Focal Plane Array detectors and Infra Red camera engines which were designated as defense articles on the U.S. Munitions List. The information charges that Chun did so without first obtaining an export license or written authorization for such export from the U.S. Department of State.
   Count two charges Chun with knowingly making and subscribing a false U.S. individual income tax return for the year 2005, which failed to report approximately $83,399.08 of taxable income he earned during said tax year.
   “This defendant is charged with violating important regulations designed to protect national security,” said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio. “He did it for money and, according to the charges, he intentionally failed to pay taxes on the money he made from his crimes.”
   “The FBI and the Department of Justice are committed to the protection of U.S. defense technology, particularly that which is governed by the International Trafficking in Arms Regulations. As such, the FBI will continue to pursue all investigative leads in this matter, and is committed to the continued investigation of any and all persons or entities who may be involved in such criminal activities and those activities with national security implications,” said Steven Anthony, Special Agent in Charge of the FBI Cleveland Field Office.
   This case is being prosecuted by Assistant U.S. Attorneys Robert W. Kern and Justin E. Herdman of the U.S. Attorney’s Office for the Northern District of Ohio, following an investigation by the Cleveland offices of the FBI and the Internal Revenue Service, Criminal Investigations.
  An information is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government's burden to prove guilt beyond a reasonable doubt.
  Source: U.S. Federal Bureau of Investigation

Investment Advisor Pleads Guilty in Scheme

   NEW YORK – 1/10/2011 - A registered investment advisor pleaded guilty on Jan. 7 to conspiracy and securities fraud charges in connection with his participation in an insider trading scheme, announced U.S. Attorney for the Southern District of New York Preet Bharara.
   Alexei P. Koval, aka “Aleksey Koval,” admitted that he obtained inside information from his co-conspirator, Igor Poteroba, a former investment banker in the Healthcare Group of UBS Securities LLC, and then traded on that information.
   The information related to six mergers and acquisitions that certain UBS clients were contemplating. Koval pleaded guilty in Manhattan federal court before U.S. District Judge Paul A. Crotty.
   “Alexei Koval flagrantly violated the securities laws to make a quick profit, and now he will pay for his crimes,” Bharara said. “Insider trading undermines faith in the market and cheats honest investors. It will not be tolerated. Together with our law enforcement partners, we will continue to prosecute and punish those who use their access to inside information to break the law.”
   According to documents previously filed in Manhattan federal court, from May 2006 through at least 2009 Koval was a registered investment adviser. During approximately the same time period, Poteroba served as an executive director at UBS. In that capacity, Poteroba obtained material, non-public information regarding certain mergers and acquisitions involving the following six publicly traded healthcare companies: Guilford Pharmaceuticals Inc., Molecular Devices Corporations, PharmaNet Development Group Inc., Via Cell Inc., Millennium Pharmaceuticals Inc. and Indevus Pharmaceuticals Inc.
   In violation of his duties of trust and confidence, Poteroba then disclosed the UBS inside information to Koval, who in turn disclosed the UBS inside information to another co-conspirator (CC-1).
   As part of the scheme, Koval typically received tips from Poteroba by telephone in advance of a public announcement about certain mergers and acquisitions. Shortly after receiving a tip from Poteroba, Koval and CC-1 purchased securities in one of the healthcare companies on the basis of the UBS inside information.
   Following the public announcement of the acquisition, Koval and CC-1 quickly sold the securities they had purchased. Koval and CC-1 executed dozens of securities transactions based on UBS inside information provided by Poteroba. Koval then paid a portion of the profits to Poteroba.
   Koval pleaded guilty to three counts of securities fraud and one count of conspiracy to commit securities fraud. The securities fraud counts each carry a maximum sentence of 20 years in prison and a maximum fine of $5 million.
   The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. Koval agreed as part of his plea agreement to forfeit at least $1,414,290, representing the amount of proceeds obtained as a result of the securities fraud offenses.
   Koval, 36, of Chicago, and Pasadena, Calif., will surrender to federal authorities on Jan. 14, 2011, and is scheduled to be sentenced by Judge Crotty on April 12, 2011, at 2:30 p.m.
   Poteroba, 37, of Darien, Conn., pleaded guilty to similar charges before Judge Crotty on Dec. 21, 2010. He is scheduled to be sentenced on March 16, 2011.
  This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. The case is being handled by the U.S. Attorney Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Marissa Molé is in charge of the prosecution.
  Note: Original release date was Jan. 7, 2011. Source: Financial Fraud Enforcement Task Force

Illinois Public Schools Look to Tax Plan for Help

    By Andrew Thomason (Illinois Statehouse News) - 1/9/2011 - School districts in Illinois could soon have in hand the nearly $1.1 billion owed to them by the state.
    Senate President John Cullerton, D-Chicago, laid out a plan on Jan. 6 to borrow billions of dollars to pay off the state’s mountain of unpaid bills, then raise the income tax by 75 percent to pay off its new debt.
   Cullerton said Gov. Pat Quinn and Illinois Speaker of the House Michael Madigan have signed on for the borrow-and-tax idea.
   If the Democrats’ proposal gets approved in the final days of the current General Assembly, Manteno Community Unit School District soon could see the $1 million it has been waiting on from the state.
  “I know these are tough decisions that they (legislators) are working on," said Manteno Superintendent Dawn Russert. "I’ve told my local legislator that I’m willing to pay more in an income tax so that the children of our state have a bright future.”
   Paying schools and others the money promised by the state accounts for just a piece of the increase, but the Democrats plan is much more bloated than that, said Jeff Mays, president of Illinois Business Roundtable.
   “The first question in a lot of people’s minds is how can they allow themselves to get in that kind of hole in the first place? How can we allow ourselves to be floating our vendors or our schools when we’re expanding programs?” Mays said.
  Some have accused the legislature of holding schools and social service hostage in exchange for a tax increase.
  Carthage Elementary School District Superintendent Vicki Hardy said she didn’t necessarily agree with that, but said she is tired of the state playing chicken with her district’s funding, only to avoid a disaster at the last second.
  “We go back to our staff and say there are going to be this many cuts across the board because the state tells us that is what is going to happen," Hardy said. "And then two months after the school year starts, well more money has come in, they found money here, which is great, don’t me wrong. But then, year after year, it makes (the administration) look like we’re liars.”
  Having the state withhold payments makes it hard to craft budgets, according to Christopher Norman, director of finances at Alton Community School District. The state owes the Alton district more than $3 million.
  “The frustrating part is that if this continues, we will be getting to a point where you start dismantling programs that are doing the things you want to do,” Norman said.
  It also creates an environment of uncertainty for employees of the schools.
  “I look at the human side when you give risk notices to staff members, and maybe for some of our teachers, they’re the only ones working," Russert said. That puts a lot of stress in their lives as well, as “am I going to be able to make my mortgage payments? Am I going to be able to put food on the table for my kids next year?’”.
  In addition settling the state's past-due account, the Democrats plan would create an education fund paid for by increasing the cost of a pack of cigarettes by a dollar, according to Cullerton.
  He said that there would be no strings attached to the $377 million fund.
  Cullerton said the tax hike would originate in the Illinois House, which failed to pass a tax increase in 2009 for lack of support.
  The House is back in Springfield Sunday to tie up the loose ends of the current session before a new General Assembly session begins on Jan. 12.
   Story courtesy of Illinois Statehouse News

Survey: U.S. Base Salary Increases on the Rise

   PHILADELPHIA - (BUSINESS WIRE) - 1/3/2011 - U.S. employees can expect median base salary increases of 2.8 percent in 2011, according to a new Hay Group survey released on Jan. 3. This compares to median actual base salary increases of 2.4 percent in 2010. Planned increases in 2011 are also at 2.8 percent for management/professional and support positions. Executives and skilled trade jobs come in slightly lower at 2.7 percent.   
   “Relatively speaking, a forecasted median 2011 base salary increase of 2.8 percent is good news for employees who, over the past two years, saw the lowest salary increases in decades,” Hay Group’s North American Reward Practice Leader Tom McMullen said. “Hay Group’s survey also points to a positive trend in organizational staffing. We found that the number of organizations increasing their staffing levels is double that of organizations that are decreasing their staffing levels.”
    Hay Group’s research also indicates that many of the cuts organizations have made to labor costs due to the recession have already happened. The percentage of organizations using or considering significant labor cost reduction items is considerably lower than data reported 18 to 24 months ago.
    The percentage of organizations using or considering the following labor cost reduction actions:
  • Pay freezes: 18 percent
  • Reduced retirement benefits: 17 percent
  • Other reduced benefits: 15 percent
  • Decreasing staffing levels: 10 percent
  • Job sharing: 9 percent
  • Furloughs: 7 percent
  • Reduced working hours: 5 percent
  • Salary cuts: 4 percent
    One exception to this trend is the continued emphasis on increasing employee co-pays and scaling back on employer paid coverage. Nearly 50 percent of organizations report either actual recent increases in employee co-pays (or reduced employer paid coverage), or that they are considering doing this in the near future.
    “Despite the optimism in our latest data, the contraction in the U.S. economy will not be reversed overnight, and neither will the return to the 3.5 percent to 4.5 percent base salary increases employees were used to receiving for much of the last decade,” McMullen said. “Along with modest base salary increases, we will likely see a continued emphasis on variable pay programs, both incentives and bonuses, as organizations emerge from the recession. Organizations are willing to pay for results, but only if they get those results.”
    An area of concern revealed in the data is the lack of differentiation in base salary increases between top performers and average performers. Top performers are reported to receive a median 3.1 percent increase versus the 2.8 percent increase reported for the typical employee.
    “Organizations have a difficult time differentiating pay increases when the pot of money gets smaller,” said McMullen. “Couple this with the ineffectiveness of many line managers in assessing employee performance and undifferentiated pay is the outcome. Managers have an opportunity to utilize their suite of ‘total’ reward programs – all of the financial and non-financial rewards that the organization provides – to reinforce the link back to individual and team performance.”
    Hay Group’s forecast results are based on the latest data available from Hay Group’s U.S. database, provided by 468 U.S. organizations in November 2010. Typical respondents to the survey include compensation professionals in the Human Resources departments of small to large size U.S. organizations across a wide range of industries. Hay Group’s core compensation database represents compensation practices for almost 3,000 companies and over 6 million employees.