Month: June 2012

I Wonder if This Will Effect Coverage of Outsourcing

Romenesko is reporting on a This American Life story about how a local news service is using overseas reporters and having them use aliases in order to conceal the fact:

The latest “This American Life” looks at hyperlocal content provider Journatic and interviews Journatic writer-editor Ryan Smith, who reveals that the company uses fake bylines for its Filipino writers — or did, until “TAL” blew the whistle on them.

Smith tells TAL’s Sarah Koenig that “when I ended up looking at the names on a lot of the stories [he edited], the names on the stories that were published weren’t the ones that I saw had written the stories.”

One piece, for example, had the byline of “Ginny Cox,” when the story was actually written by Gisele Bautista in the Philippines.

Producer Koenig says: “Looking at the computer system that the company uses to manage its stories, it seems that when Gisele worked on this real esate story, there was a button called SELECT ALIAS, and when she clicked on it, she had a choice: she could either be Ginny Cox, or Glenda Smith.

Journatic and the Chicago Tribune’s TribLocal have used other fake bylines for stories written by Filipino writers, including Jimmy Finkel, Carrie Reed, Jay Brownstone and Amy Anderson.

Romenensko (and apparently TAL), are focusing on the journalistic ethic issues of fake bylines.

I’m actually more interested in the effect that this will have on the coverage of outsourcing and moving overseas that we see from the mainstream media.

I have always felt that one of the conceits which gave us generally laudatory coverage of moving jobs  overseas was the conceit that reporting could not be outsourced.

Now that they know that it’s their jobs on the line, I wonder if the tenor of the stories will change.

Another Day, Another Failed Military Procurement Program

The US Army has canceled the Boeing Hummingbird:

This month, the Army planned to deploy to Afghanistan an unusual new drone: an unmanned eye-in-the-sky helicopter programmed to use high-tech cameras to monitor vast amounts of territory. But now the drone might be lucky to be deployed at all, as the Army has moved to shut down production — possibly ending the program forever.

That drone would be the A160 Hummingbird, which the Army planned to equip with the powerful Autonomous Real-Time Ground Ubiquitous Surveillance Imaging System, or Argus. But earlier this month, the Army issued a stop-work order — one step away from termination — to the drone’s developer Boeing. The reason? A high “probability of continued technical and schedule delays,” costs and risks that have “increased so significantly that program continuation is no longer in the best interest of the government,” said Donna Hightower, the Army’s acting product manager for unmanned aerial systems modernization.

The A160 was set to be one of the Army’s most radical new drones. The chopper-drone could loiter for 20 hours at up to 15,000 feet, with a range of 2,500 nautical miles. It could observe up to 36 square miles, thanks to its Argus sensors. Also, Argus has a 1.8 gigapixel camera. Viewed through 92 five-megapixel imagers and 65 video windows for zooming in at ultra-high resolution, the the A160 drone would have been well-suited for spying on enemy fighters in vast and remote terrain like in Afghanistan, where three of the drones were scheduled to deploy this month. The A160 has also been sent on special operations workouts.

It appears that there were problems with the sensor suite, but perhaps more significantly, the aircraft experienced vibration problems during a flight test, and it’s innovative variable speed rotor system was supposed to address this, so it puts the basic architecture in question.

The Worm Has Turned

Germany is clearly the largest power in the Euro Zone, but without a sycophant like Sarkozy in France, the 2nd largest power in Europe, it turns out that she actually can’t decree what will happen:

European leaders have moved to halt the crisis engulfing Spain and Italy by agreeing a radical bailout package for the single currency’s teetering banks.

Amid deep divisions over the debt and currency crisis, and under immense pressure to come up with credible moves, Angela Merkel, the German chancellor, softened her hard line on fiscal discipline and debt repayment to hand Mariano Rajoy, the Spanish prime minister, a summit triumph.

Leaders agreed to set up a supervisory system for eurozone banks that will form the first step towards full banking union, scrapped the requirement that governments get preferential status over private investors in the event of a default and eased the stiff terms for future bailouts.

When she has the governments of France, Spain, and Italy unite to oppose her, she had to blink.

I don’t expect her to do anything that she is not absolutely forced to do, but she is not an immovable object, and now the others in Europe realize this.

Not Enough Bullets…

So, JPMorgan Chase loses $9 billion under the watch of their Chief Investment Officer Ina Drew, so they fire her, and they are letting her walk with millions of dollars:

JPMorgan Chase & Co. (JPM)’s decision to let Chief Investment Officer Ina Drew retire four days after the bank disclosed a $2 billion loss in her division allowed her to walk away with about $21.5 million in stock and options.

Drew, who resigned May 14, can keep $17.1 million in unvested restricted shares and about $4.4 million in options that she otherwise would have been required to forfeit if the New York-based bank had terminated her employment “with cause,” according to regulatory filings and estimates from consulting firm Meridian Compensation Partners LLC.

A 30-year JPMorgan veteran, Drew also had accumulated 661,000 unrestricted shares of common stock worth about $23.7 million based on the May 14 closing price, $9.7 million in deferred compensation and $2.6 million in pension pay as of Dec. 31, according to company filings. Altogether, Drew’s stock, pension and deferred pay come to about $57.5 million.

“She was with that company for a long time,” said Frank Glassner, a partner at Meridian in San Francisco. “She was an incredibly talented, well-thought-of employee, not only within the company but on the Street. A lot of this money had been earned over a great deal of time, not just yesterday.”

Obviously, part of this is money already earned, but unvested shares?  For ordinary people, if you leave, the unvested shares are gone.

 Seriously, am I the only one who thinks that this is hush money?

H/t Felix Salmon

It Would Be Nice if This Stuck, But It Won’t, the Sequel

Is Yves Smith at Naked Capitalism noted some time ago, the failure to properly convey notes to trusts technically to the trusts that managed the mortgage backed securities means that there are tens, if not hundreds, of billions in tax liabilities owed:

The Internal Revenue Service has launched a review of the tax-exempt status of a widely-held form of mortgage-backed securities called REMICs.

The IRS confirmed to Reuters that the review comes in response to mounting evidence that banks violated tax requirements by mishandling the transfer of mortgages to REMICs, short for Real Estate Mortgage Conduits.


As of the end of 2010, investments in REMICs totaled more than $3 trillion, according to data supplied by the Securities Industry and Financial Markets Association.

In a brief statement in response to questions from Reuters, the agency said: “The IRS is aware of questions in the market regarding REMICs and proper ownership of the underlying mortgages as set out in federal tax law, and is actively reviewing certain aspects of this issue.”


The review, however, is a sign that the widespread bank misdeeds in home foreclosure cases are spilling over to threaten the interests of investors in mortgage-backed securities. The banks originated the mortgages and packaged them into securities.


For investors, one of the big attractions of REMICs has been that they aren’t “double-taxed.” While individual investors pay taxes on income they receive from REMICs, the securities themselves are exempt from business income tax.

But if the IRS concludes that the REMIC investments failed to comply with strict requirements in the federal tax code, the REMIC would have to pay a 100 percent tax on the income from those investments.

That means that the IRS could confiscate the full amount. Tax law experts said the REMICs also could be subjected to additional penalties for failing to file tax returns on the income.

James Peaslee, a partner at law firm Cleary Gottlieb who is an expert on taxation of securitized investments, said that even if the IRS finds wrongdoing, it might be loath to act because of the wide financial damage the penalties would cause. He notes that the REMIC investors, who he called “innocent parties,” would have to pay rather than the banks that were responsible for any wrongdoing in transferring mortgage ownership.

But Adam Levitin, a Georgetown University Law School professor and expert on taxation, said that if the IRS fails to act, “it would be a backdoor bailout of the financial system.”

Well, we know nothing is going to happen, because Obama and Geithner have made it clear that the banksters never pay, the taxpayers do.

Of course they are going to go for the backdoor bailout, particularly because this would reflect back on the banks:

If the IRS did impose penalties, the REMICs could turn around and sue the banks for causing the problems and not living up to the terms of the agreements establishing each REMIC, thus transferring the costs to the banks. If the IRS finds wrongdoing but fails to act, the IRS would forego “potentially enormous tax revenue that would be passed on to the federal government,” Levitin said. “Given the federal budget deficit that’s not something to sniff at,” he added.

Yeah, let’s run the numbers.  $3 trillion, let’s assume 5 years of 5% returns, and no compounding.

Well, with the 100% tax rate, regulatory forbearance will cost the taxpayers $750 billion for the taxpayer before even considering penalties and interest.

The scary thing is that by the standards of the bankster bailouts, this is just pocket change.

China Doesn’t Need Spies

Because our defense contractors are eager to sell them our defense secrets. It’s kind of ironic, they are outsourcing their espionage to us:

United Technologies and two of its subsidiaries sold China software enabling Chinese authorities to develop and produce their first modern military attack helicopter, U.S. authorities said June 28.

At a federal court hearing in Bridgeport, Conn., United Technologies and its two subsidiaries, Pratt & Whitney Canada and Hamilton Sundstrand, agreed to pay more than $75 million to the U.S. government to settle criminal and administrative charges related to the sales.

As part of the settlement, Pratt & Whitney Canada agreed to plead guilty to two federal criminal charges – violating a U.S. export control law and making false statements. The charges were in connection with the export to China of U.S.-origin military software used in Pratt & Whitney Canada engines, which was used to test and develop the new Z-10 helicopter.

Also as part of the deal, United Technologies and Hamilton Sundstrand admitted to making false statements to the U.S. government about the illegal exports.

Hamilton Sundstrand and Pratt & Whitney Canada also admitted that they had failed to make timely disclosures, required by regulations, to the U.S. State Department about the exports.

The government said that the $75 million settlement breaks down into roughly $20.7 million in criminal fines, forfeitures and other penalties to be paid to the Justice Department and roughly $55 million in payments to the State Department as part of a consent agreement resolving more than 500 administrative export control violations.

About $20 million of the fines will be suspended, to be used by the company for continuing to improve its export control procedures, and for hiring an independent monitor, United Technologies said.

As part of the agreement, the U.S. State Department also will impose a partial debarment of Pratt & Whitney Canada for new export licenses, although the company can request licenses on a case-by-case basis. The debarment does not affect United Technologies or Hamilton Sundstrand, and the Canadian unit can request full reinstatement in one year.

A law enforcement source familiar with the case said investigators believe United Technologies and its subsidiaries deliberately set out to provide the embargoed military technology to China to ingratiate themselves with Chinese authorities, hoping to win them entree into China’s lucrative civilian helicopter market, worth an estimated $2 billion.

To quote Karl Marx, “The last capitalist we hang shall be the one who sold us the rope.”

H/t my Dad.

Did I Say $2 Billion? I Meant $9 Billion.

It looks like “the Whale” f%$#ed up even bigger than was previously reported:

Losses on JPMorgan Chase’s bungled trade could total as much as $9 billion, far exceeding earlier public estimates, according to people who have been briefed on the situation.

When Jamie Dimon, the bank’s chief executive, announced in May that the bank had lost $2 billion in a bet on credit derivatives, he estimated that losses could double within the next few quarters. But the red ink has been mounting in recent weeks, as the bank has been unwinding its positions, according to interviews with current and former traders and executives at the bank who asked not to be named because of investigations into the bank.

I’ll take the “over” on this latest estimate.

Well, This is a Surprise

Seriously, I am surprised that Egyptian President-Elect Mohamed Morsi has announced that he will appointing a woman and a Christian to vice-presidency positions:

Egypt’s first democratically elected president, Mohamed Morsi, will appoint a woman as one of his vice presidents and a Christian as another, his policy adviser told CNN.

“For the first time in Egyptian history — not just modern but in all Egyptian history — a woman will take that position,” Ahmed Deif told CNN’s Christiane Amanpour on Monday. “And it’s not just a vice president who will represent a certain agenda and sect, but a vice president who is powerful and empowered and will be taking care of critical advising within the presidential Cabinet.”

I think that a deal has been cut between the military and the Muslim Brotherhood, because we also saw the military’s power to make warrantless detentions rolled back.

Some sorts of reassurances must have been made.

Hopefully, this is a good thing.

It Would Be Nice if This Stuck, But It Won’t

Farmers in Brazil have won a 7½ billion dollar lawsuit against Monsanto for shaking them down for never-ending fees:

Monsanto may soon be forced to pay as much as 7.5 billion dollars back to the farmers who say that the mega corporation took their rightfully earned income and taxed their small businesses to financial shambles. It all started with a monumental lawsuit launched by over 5 million farmers against Monsanto looking to recover financial losses from ridiculous seed taxes that bankrupted many families.

Back in April, a Brazilian court ruled that Monsanto absolutely was responsible for paying back the exorbitant amounts of cash back to the farmers, ordering the company to issue back all of the taxes collected since 2004 — a minimum of 2 billion dollars. Afterwards, Monsanto appealed the decision and the case is now suspended until a further hearing is initiated by the Justice Tribune of the local court stationed in Rio Grande do Sul.

Recently, however, the Brazilian Supreme Court declared that any decision reached in a local court case should apply nationally. The result? Monsanto now faces even larger charges, due to the larger legal application on a national level. Now, the charges total or exceed 7.5 billion dollars.

I don’t expect this to survive appeal, because, after all, it’s peasants versus Monsanto, and you can be sure that the Department of Commerce is already burning up the phone lines trying to fix this, shortly to be followed by State, and probably the Pentagon as well.

Silly peasants, don’t you know that the laws doesn’t apply to  rich people and transnational corporation?

Republicans Cheat Again

Faced with the prospect of the receipt of many more signatures than is required to reverse Michigan’s emergency manager law, and to enshrine labor rights in the constitution, Republican members of the Michigan Board of State Canvassers have resigned to prevent a meeting by denying quorum:

The Michigan Board of State Canvassers has cancelled a meeting scheduled for next Tuesday, June 26th. I confirmed this with a phone call to the Elections Bureau this afternoon. Additionally, Republican Board member Jeff Timmer is rumored to have resigned and it is believed that the other Republican, Norm Shinkle, will resign as well, leaving the Board without a quorum. I have been unable to confirm Timmer’s resignation but I have heard about it from multiple sources.

Without a quorum, the Board will be unable to certify ANY of the referendums headed for the ballot in November. They will need to wait until Governor Rick Snyder appoints replacements, a process that could take … oh, I don’t know … some time. Wouldn’t want to rush into it or anything, make a hasty decision and such.


Let’s be clear here, anyone who thinks that you can negotiate in good faith with folks like this is delusional.

Still No Prosecutions

The great Matt Taibbi has a scoop about how Wall Street cheated municipalities on their bond sales, and they have it on tape:

Someday, it will go down in history as the first trial of the modern American mafia. Of course, you won’t hear the recent financial corruption case, United States of America v. Carollo, Goldberg and Grimm, called anything like that. If you heard about it at all, you’re probably either in the municipal bond business or married to an antitrust lawyer. Even then, all you probably heard was that a threesome of bit players on Wall Street got convicted of obscure antitrust violations in one of the most inscrutable, jargon-packed legal snoozefests since the government’s massive case against Microsoft in the Nineties – not exactly the thrilling courtroom drama offered by the famed trials of old-school mobsters like Al Capone or Anthony “Tony Ducks” Corallo.

But this just-completed trial in downtown New York against three faceless financial executives really was historic. Over 10 years in the making, the case allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street.

The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from “virtually every state, district and territory in the United States,” according to one settlement. And they did it so cleverly that the victims never even knew they were being ­cheated. No thumbs were broken, and nobody ended up in a landfill in New Jersey, but money disappeared, lots and lots of it, and its manner of disappearance had a familiar name: organized crime.

In fact, stripped of all the camouflaging financial verbiage, the crimes the defendants and their co-conspirators committed were virtually indistinguishable from the kind of thuggery practiced for decades by the Mafia, which has long made manipulation of public bids for things like garbage collection and construction contracts a cornerstone of its business. What’s more, in the manner of old mob trials, Wall Street’s secret machinations were revealed during the Carollo trial through crackling wiretap recordings and the lurid testimony of cooperating witnesses, who came into court with bowed heads, pointing fingers at their accomplices. The new-age gangsters even invented an elaborate code to hide their crimes. Like Elizabethan highway robbers who spoke in thieves’ cant, or Italian mobsters who talked about “getting a button man to clip the capo,” on tape after tape these Wall Street crooks coughed up phrases like “pull a nickel out” or “get to the right level” or “you’re hanging out there” – all code words used to manipulate the interest rates on municipal bonds. The only thing that made this trial different from a typical mob trial was the scale of the crime.

USA v. Carollo involved classic cartel activity: not just one corrupt bank, but many, all acting in careful concert against the public interest. In the years since the economic crash of 2008, we’ve seen numerous hints that such orchestrated corruption exists. The collapses of Bear Stearns and Lehman Brothers, for instance, both pointed to coordi­nated attacks by powerful banks and hedge funds determined to speed the demise of those firms. In the bankruptcy of Jefferson County, Alabama, we learned that Goldman Sachs accepted a $3 million bribe from J.P. Morgan Chase to permit Chase to serve as the sole provider of toxic swap deals to the rubes running metropolitan Birmingham – “an open-and-shut case of anti-competitive behavior,” as one former regulator described it.


How did the government manage to make a case against so many Wall Street scam artists? Hubris. As was the case in Jefferson County, Alabama, where Chase executives blabbed criminal conspiracies on the telephone even though they knew they were being recorded by their own company, the trio of defendants in Carollo wantonly fixed bond auctions despite the fact that their own firm was taping the conversations. Defense counsel even made an issue of this at trial, implying to the jury that nobody would be dumb enough to commit a crime by phone when “there was a big sticker on the phones that said all calls are being recorded,” as Grimm’s counsel, Mark Racanelli, put it. In fact, Racanelli argued, the conversations on the tapes hardly suggested a secret conspiracy, because “no one was whispering.”

But the reason no one was whispering isn’t that their actions weren’t illegal – it’s because the bid rigging was so incredibly common the defendants simply forgot to be ashamed of it. “The tapes illustrate the cavalier attitude which the financial community brought toward this behavior,” says Michael Hausfeld, a renowned class-action attorney whose firm is leading a major civil suit against Bank of America, Wells Fargo, Chase and others for this same bid-rigging scam. “It became the predominant mode of transacting business.”

Seriously, what does it take for these guys to get indicted?

He has an addenda on the article here.