Reuters - Alleged Madoff $50 billion fraud hits other investors

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Alleged Madoff $50 billion fraud hits other investors

Friday, Dec 12, 2008 8:18PM UTC

By Jon Stempel and Christian Plumb

NEW YORK (Reuters) - Investors scrambled to assess potential losses from an alleged $50 billion fraud by Bernard Madoff, a day after the arrest of the prominent Wall Street trader.

Prosecutors and regulators accused the 70-year-old former chairman of the Nasdaq Stock Market of masterminding a Ponzi scheme of epic proportions through a hedge fund he ran. Hundreds of people, investing with him through the fund's clients, entrusted Madoff with billions of dollars, industry experts said.

"Madoff's investors included captains of industry, corporations (some of which are publicly traded) that used Madoff almost as a high-yielding cash management account, endowments, universities, foundations and, importantly, many high-profile funds of funds," said Douglas Kass, who heads hedge fund Seabreeze Partners Management.

"It appears that at least $15 billion of wealth, much of which was concentrated in Southern Florida and New York City, has gone to 'money heaven,'" he added.

Federal agents arrested Madoff at his apartment on Thursday after prosecutors said he told senior employees that his money management operations were "all just one big lie" and "basically, a giant Ponzi scheme."

Madoff is the founder of Bernard L. Madoff Investment Securities LLC, a market-making firm he launched in 1960. His separate investment advisory business had $17.1 billion of assets under management.

"BUSINESS AS USUAL?"

About a dozen angry investors gathered on Friday in the lobby of the Lipstick Building in midtown Manhattan, where the market-making firm and advisory fund are both headquartered, demanding to know the fate of their money.

One woman who declined to give her name said that when she called the firm's offices on Thursday she was told it was "business as usual."

Another investor groused, "Business as usual? Of course it's business as usual. We're getting screwed left and right."

Police later evicted the small group from the building.

The two most prominent hedge funds that invested with Madoff were the $7.3 billion Fairfield Sentry Ltd, run by Walter Noel's Fairfield Greenwich Group, and the $2.8 billion Kingate Global Fund Ltd, run by Kingate Management Ltd.

Fairfield Sentry and Kingate Global were among a small group of hedge funds to report positive returns for 2008; the average hedge fund was down 18 percent, according to data from Hedge Fund Research.

"People who came to us for portfolio construction were often already invested with Bernie Madoff, he had hundreds of clients," said Charles Gradante, who invests in hedge funds as a principal at Hennessee Group LLC. "Now his whole legacy is destroyed. He was God to people."

In a Ponzi scheme, a swindler uses money from new investors, who are lured with the promise of high or consistent returns, to pay off earlier investors.

Prior to Madoff's arrest, investors had wondered how he was able to generate annual returns in the low double digits in a variety of market environments. Many questioned how U.S. regulators were able to ignore numerous red flags with regards to Madoff's fund.

"Many of us questioned how that strategy could generate those kinds of returns so consistently," said Jon Najarian, an options trader who knows Madoff and is a co-founder of optionmonster.com.

In May 2001, Barron's reported that option strategists for major investment banks said they couldn't understand how Madoff managed to generate the returns that he did.

"We weren't comfortable with Madoff," said Brad Alford, president at investment adviser Alpha Capital in Atlanta. "We didn't understand how his strategy could generate the kind of returns it did. We will walk away from things like that."

MORE TO COME?

U.S. stocks tumbled in early trading Friday, with some investors citing the Madoff case as well as the failure of talks in Congress on a rescue for the U.S. auto industry. The market later staged a limited rebound.

Investors overseas were also reeling from the alleged fraud.

Benedict Hentsch, a Swiss private bank, said it had 56 million Swiss francs ($47 million) of exposure to Madoff's investment advisory business. UniCredit SpA's fund management unit, Pioneer Investments, has exposure through its Primeo Select hedge fund, two people familiar with the matter said.

Bramdean Alternatives Ltd said almost 10 percent of its holdings were exposed to Madoff, sending shares in the UK asset manager crashing.

CNBC Television reported that Sterling Equities, which owns the New York Mets baseball team, had accounts managed by Madoff.

"UNFORTUNATE SET OF EVENTS"

Madoff said "there is no innocent explanation" for his activities, and that he "paid investors with money that wasn't there," according to the federal complaint.

Prosecutors also alleged that Madoff wanted to distribute as much as $300 million to employees, family members and friends before turning himself in.

Charged with one count of securities fraud, he faces up to 20 years in prison and a $5 million fine. The Securities and Exchange Commission filed separate civil charges.

A federal judge is expected later Friday to hold a hearing on whether to put assets under Madoff's control into a receivership.

Madoff's lawyer, Dan Horwitz, said on Thursday, "We will fight to get through this unfortunate set of events." His client was released on $10 million bond.

Madoff is a member of Nasdaq OMX Group Inc's nominating committee. His firm has said it is a market-maker for about 350 Nasdaq stocks.

He is also chairman of London-based Madoff Securities International Ltd, whose chief executive, Stephen Raven, said the firm was "not in any way part of" the New York-based market-maker.

"Our business activities are not involved in any way with the U.S. asset management company with which the reported allegations appear to be concerned," Raven said.

(Reporting by Jennifer Ablan, Edith Honan, Aarthi Sivaraman and Leah Schnurr and Dan Wilchins in New York; Svea Herbst-Bayliss in Boston, Steve Slater in London and Lisa Jucca in Zurich; editing by Jeffrey Benkoe and John Wallace)

Reuters - Nokia takes on Huawei in connecting laptops

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Nokia takes on Huawei in connecting laptops

Friday, Dec 12, 2008 1:43PM UTC

HELSINKI (Reuters) - The world's top mobile phone maker Nokia plans to tap the surging market for connecting laptops to wireless networks taking on market leader Huawei Technologies, its senior official said.

Nokia will start to ship its first Internet stick in early 2009, aiming to benefit from its know-how and experience in developing 3G technologies, Tapio Markki, vice president for hardware platform components at Nokia, told Reuters.

"Leveraging these capabilities, we believe we are well-positioned to become one of the winning providers for HSPA modem solutions. The market for HSPA modems is expected to grow very rapidly during the coming years," Markki said.

Nokia declined to comment on the price of the device -- which uses HSPA, a super-fast 3G technology -- saying it would be sold mostly through operators and bundled with services.

Strategy Analytics said it expects the global market for so-called "dongles" -- external USB modems and PC cards -- to grow to 26 million units next year from 20 million this year.

"In particular European operators, such as Vodafone, are aggressively promoting and subsidizing dongles right now, because they are seen as a secondary device that provides additional revenues for carriers beyond a traditional handset," said Neil Mawston from Strategy Analytics.

Nokia tried to enter into the business of connecting laptops to wireless networks in late 2006 when it said it had developed an embedded 3G module for notebook computers, which Intel agreed to sell as part of its next-generation Centrino Duo mobile technology platform.

But in early 2007, Nokia and Intel made a joint decision to cease cooperation on the connectivity module.

(Reporting by Tarmo Virki; Editing by Mike Nesbit)

Reuters - Illinois governor arrested on corruption charges

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Illinois governor arrested on corruption charges

Tuesday, Dec 09, 2008 6:50PM UTC

By Michael Conlon and Andrew Stern

CHICAGO (Reuters) - Illinois Gov. Rod Blagojevich was arrested on Tuesday on corruption charges, including that he tried to sell the U.S. Senate seat vacated by fellow Democrat and President-elect Barack Obama.

Prosecutors also said the governor tried to muscle the Chicago Tribune into firing editorial writers who were critical of him.

While Obama has long distanced himself from the governor of his home state -- who has been under investigation on other issues for years -- Blagojevich's arrest was likely to be an embarrassment to the president-elect.

The case shines a light once again on old-style corruption in the Chicago political caldron from which Obama emerged.

"The breadth of corruption laid out in these charges is staggering," U.S. Attorney Patrick Fitzgerald, the federal prosecutor, said in a statement.

It was enough to make Abraham Lincoln "roll over in his grave," Fitzgerald later told reporters, adding the arrest of Blagojevich was made because he wanted to stop a "crime spree."

In Illinois, the governor selects a successor when there is a mid-term vacancy in the U.S. Senate. Obama, who takes office on January 20, resigned from the Senate soon after winning the November 4 presidential election.

How the case might affect his Senate replacement was unclear. There were immediate calls from both Republicans and Democrats in Illinois that Blagojevich resign, allowing the lieutenant governor, also a Democrat, to step in. Under state law, Blagojevich could still make the appointment even if later indicted.

But federal prosecutors said they moved against the governor before he could make the Senate choice.

Neither Blagojevich or his office issued a statement after the charges were revealed. The governor and a senior aide were taken into custody at their Chicago homes. Blagojevich was due in court later on Tuesday.

Federal prosecutors said Obama was not implicated.

"I should make clear the complaint makes no allegations about the president-elect whatsoever," Fitzgerald said.

Obama aides would not immediately comment on the charges against the governor, but said the Obama transition office would be issuing a statement.

"FOR SALE" SIGN

The 51-year-old Blagojevich and his chief of staff, John Harris, were each charged in a federal complaint with conspiracy to commit mail and wire fraud, and a second count of solicitation of bribery.

In his statement, Fitzgerald said the charges "allege that Blagojevich put a 'for sale' sign on the naming of a United States senator; involved himself personally in pay-to-play schemes with the urgency of a salesman meeting his annual sales target; and corruptly used his office in an effort to trample editorial voices of criticism."

Blagojevich was accused of threatening to withhold state assistance to the Tribune Company in connection with the sale of the Chicago Cubs' baseball home, Wrigley Field, in order "to induce the firing of Chicago Tribune editorial board members sharply critical" of him, Fitzgerald said.

Blagojevich allegedly was caught on court-authorized wiretaps during the last month.

He was seeking a "substantial" salary for himself at a nonprofit foundation or union affiliated organization, a spot on a corporate board for his wife, promises of campaign cash, as well as a cabinet post or ambassadorship in exchange for his Senate choice, an FBI affidavit said.

Even though it was unclear what would happen now to the selection of a successor to Obama in the Senate, the spot would be certain to go to a Democrat. Democrats, with independent allies, will hold at least 58 seats in the 100-seat Senate when the new Congress convenes in early January. A Minnesota Senate seat is still undecided.

Blagojevich, in his second term, is the latest in a string of Illinois governors to run afoul of the law. His immediate predecessor, George Ryan, is in jail following a federal corruption conviction.

HEFTY PRISON TERM POSSIBLE

If Blagojevich is convicted, each mail and wire fraud charge carries a maximum sentence of 20 years in prison while each bribery charge carries a maximum sentence of 10 years in prison. Each count carries a maximum fine of $250,000.

Blagojevich was elected to the Illinois state House in 1992 and later won a seat in the U.S. Congress that had been held by another politician who ran afoul of the law, Dan Rostenkowski.

He became Illinois' first Democratic governor in nearly 30 years when he replaced Ryan in 2003, on a platform of reform. But his popularity has descended to an all-time low after wrangles with fellow Democrats in the state legislature, some of whom had threatened him with impeachment.

(Reporting by Michael Conlon and James Vicini, Kyle Peterson and Karen Pierog in Chicago, Editing by Jackie Frank and Frances Kerry)

CNN - Illinois governor taken into custody

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Illinois governor taken into custody

Illinois Gov. Rod Blagojevich is in federal custody on corruption charges, a law enforcement official said Tuesday.

Blagojevich and his chief of staff, John Harris, are charged with conspiracy to commit mail and wire fraud and solicitation of bribery, according to a statement from the U.S. Attorney's office for the Northern District of Illinois.

Both men are expected in U.S. District Court in Chicago later Tuesday.

A news conference is expected at noon ET.

Federal prosecutors say Blagojevich, Harris and others conspired to gain financial benefits in appointing President-elect Barack Obama's Senate replacement, according to the statement.

"The breadth of corruption laid out in these charges is staggering," U.S. Attorney Patrick Fitzgerald said in a statement. "They allege that Blagojevich put a 'for sale' sign on the naming of a United States Senator; involved himself personally in pay-to-play schemes with the urgency of a salesman meeting his annual sales target; and corruptly used his office in an effort to trample editorial voices of criticism."

According to the statement, Blagojevich is alleged to have discussed obtaining:

a substantial salary for himself at either a non-profit foundation or an organization affiliated with labor unions;

a spot for his wife on paid corporate boards, where he speculated she might garner as much as $150,000 a year;

promises of campaign funds -- including cash up front;

a Cabinet post or ambassadorship for himself.

The Obama transition team is aware that Blagojevich is in federal custody, but has no comment, according to a senior Democratic source.

The statement also alleges that Blagojevich and others tried to illegally obtain campaign contributions.

Blagojevich, Harris and others are also alleged to have withheld state assistance to the Tribune Company in connection with the sale of Wrigley Field. The statement says this was done to induce the firing of Chicago Tribune editorial board members who were critical of Blagojevich.

Blagojevich, who turns 52 on Wednesday, is in his second four-year term as Illinois governor. His term ends in January 2011.

Before being elected governor, he served as a U.S. congressman for Illinois' 5th district from 1997 until 2003, according to his online biography. He and his wife, Patti, have two daughters.

Blagojevich announced last month that he was forming a panel to review candidates to fill Obama's Senate seat.

Several Illinois Democrats -- including Rep. Jesse Jackson Jr. and Iraq war veteran Tammy Duckworth, a former congressional candidate who now serves in Blagojevich's administration -- have been mentioned as possible Senate replacements for Obama.

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Reuters - MySpace delivers video to mobile phones

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MySpace delivers video to mobile phones

Wednesday, Dec 03, 2008 5:11AM UTC

By Robert MacMillan

NEW YORK (Reuters) - MySpace users with mobile phones are about to find out if they can walk and watch TV at the same time.

On Wednesday, News Corp's online social network will make video clips from its members' pages available for viewing on mobile devices including the BlackBerry Bold, Palm Centro, Motorola Q9, LG Voyager, Nokia N95 and Samsung Instinct.

Members will be able to look at video on their own homepages as well as friends' pages. They also will be able to view professionally produced video from TMZ, the celebrity news and gossip website owned by Time Warner Inc; the National Hockey League; National Geographic magazine; satirical newspaper The Onion and others.

The free service will be supported by advertising. MySpace and many other companies are trying to exploit the small but growing mobile advertising market.

MySpace declined to comment on the cost of the project or how much money it would make them.

"These are the big guys doing it, and they're going to make some noise about it," said David Card, a media analyst at Forrester Research who called it a medium-sized deal in terms of significance. "Mobile is one of those things where people keep saying, 'Is next year going to be the year of mobile'?"

MySpace video will be sent, or "streamed," from the social network's pages rather than downloaded onto mobile phones. For this reason, the clips will not be available on Apple Inc's iPhone, which runs downloaded video.

MySpace, one of the world's largest online social networks, plans to support mobile video downloads in the future, a spokeswoman said.

MySpace's growth strategy includes developing mobile phone applications, as well as international markets and building up its music service. Acquisitions are central to this strategy, Chief Executive Chris DeWolfe told the Reuters Media Summit on Monday.

The company will work with technology from a company called RipCode to make video available on mobile handsets that have different technical specifications for how they handle video.

RipCode also will allow MySpace users to stop having to save their video clips in different formats, something that it said would save hardware, energy and storage resources.

(Reporting by Robert MacMillan)

CNN - No way to stop us, pirate leader says

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No way to stop us, pirate leader says

Somalis are so desperate to survive that attacks on merchant shipping in the Gulf of Aden and the Indian Ocean will not stop, a pirate leader promises.

"The pirates are living between life and death," said the pirate leader, identified by only one name, Boyah. "Who can stop them? Americans and British all put together cannot do anything."

The interview with the pirate was conducted in late August by journalists employed by the Somali news organization Garowe. The complete interview was provided to CNN last week and provides a glimpse of why piracy has been so hard to control in the region.

Recorded on grainy video, the interview took place in the Somali port city of Eyl, now a center of pirate operations. Eyl is on the east coast of Somalia in the autonomous territory of Puntland. It is a largely lawless zone, considered extremely dangerous for Westerners to enter.

The Puntland government said two unidentified Western journalists were taken hostage Wednesday as they attempted to report on pirate activity.

Boyah said that the piracy began because traditional coastal fishing became difficult after foreign fishing trawlers depleted local fish stocks. Traditional fishermen started attacking the trawlers until the trawler crews fought back with heavy weapons. The fishermen then turned to softer targets.

"We went into the deep ocean and hijacked the unarmed cargo ships," Boyah said.

"For the past three years, we have not operated near the Somali coast. We have operated at least 80 miles [out], in international waters."

When merchant shipping started avoiding the Somali coast, Boyah said, "we went to ships traveling other routes."

Over the past year, the number of pirate attacks has increased dramatically. The International Maritime Bureau cites more than 90 pirate attacks off East Africa so far in 2008. When attacks are successful, the hijacked ships are taken to Somali waters, where the ships and crew are held until a ransom is paid.

Ships recently captured include a massive Saudi supertanker laden with crude oil valued at more than $100 million and a freighter carrying Russian-built tanks.

The hijackings have been profitable. Kenya's foreign minister, Moses Wetangula, estimates the pirates have been paid more than $150 million during the past year. One pirate gang wants $2 million dollars to release a Yemeni freighter and crew seized last week.

Facing increasing disruptions through one of the busiest sea lanes in the world, several countries have sent warships to patrol the area. There have been reports of skirmishes between pirates and naval forces, but the military presence does not concern pirate leader Boyah. He boasts the pirates literally sail in a vast ocean beneath the radar of the warships.

"No ship has the capability to see everything," he said. "A ship can see 80 miles or so [on radar]. It cannot see us at all. No one can do anything about it."

Boyah said it is unlikely the Puntland regional government would ever crack down on piracy because government officials are involved in financing the piracy and collect a cut of the ransoms.

"They motivate us. It's their money and their weapons," Boyah said. "Thirty percent belongs to them."

The Puntland foreign minister, Ali Abdi Aware, denied government involvement with the pirates, including taking bribes. The minister cited the arrest of six pirates earlier this year as evidence it is acting to stop piracy.

Pirate Boyah said he is unimpressed with the arrests by Puntland authorities.

"The pirates are at sea and Puntland does not approach them. The pirates are on land and Puntland does not approach them," Boyah said. "They arrest some small people and tell the world that they captured pirates, but they are liars."

While Boyah may have been outspoken about the government's ineffectiveness, he did not allow interviewers to show his face, an indication that even in this lawless country, pirates still have some fear.

Reuters - Google to shut down virtual world website

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Google to shut down virtual world website

Friday, Nov 21, 2008 8:28AM UTC

(Reuters) - Google Inc said it would shut down its three-dimensional virtual experience website by year end to focus more on its core search, advertisements and applications business.

The company said in its blog it supports experimentation but added: "We've also always accepted that when you take these kinds of risks not every bet is going to pay off."

Lively, which features real-time virtual world characters known as avatars and three-dimensional graphics to congregate in virtual rooms, was launched in July to match Linden Lab's popular Second Life.

"Between now and the end of the year we encourage you to capture all your hard work by taking videos and screenshots of your rooms," the blog said.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by David Holmes)

Reuters - Urgent regulation needed for nanomaterials: experts

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Urgent regulation needed for nanomaterials: experts

Wednesday, Nov 12, 2008 8:7AM UTC

By Michael Kahn

LONDON (Reuters) - More testing and regulation of nanomaterials used in an increasingly number of everyday products is urgently needed, experts said on Wednesday.

"...having analyzed the potential health and environmental impacts which flow from the properties of nanomaterials, we concluded that there is a plausible case for concern about some (but not all) classes of nanomaterials," the Royal Commission experts from the scientific, legal, business and medical communities wrote in a British government-funded report.

In particular the report cited tiny soccer-ball shaped carbon molecules called buckyballs that may have potential uses ranging from novel drug-delivery system to fuel cells, as well as carbon nanotubes and nanosilver.

Recent studies have found buckyballs -- short for buckministerfullerenes -- may threaten health by building up fat and have linked carbon nanotubes to potential lung cancer risk.

"We are very conscious of the extent to which knowledge about the potential health and environmental impacts of nanomaterials lags significantly behind the pace of innovation, although this could change as new scientific information arises," the study said.

Nanotechnology, the design and manipulation of materials thousands of times smaller than the width of a human hair, has been hailed as a way to make strong, lightweight materials, better cosmetics and even tastier food.

Major corporations and start-ups across almost every industry invest in nanotechnology, which found its way into $147 billion worth of products in 2007, according to Lux Research.

But scientists are only just starting to look at the impact such tiny objects might have, and the British report warned existing regulations may not be able to keep up with technology.

"We are also concerned that more sophisticated later generation nanoproducts will raise issues which cannot be dealt with by treating them as chemicals or mixtures of chemicals," John Lawton, an ecologist, who chaired the report, said in a statement.

The report, to which the government must reply, also determined that there were not grounds for a blanket ban or moratorium on nanomaterials.

Specifically, it also called on the government to recognize a "degree of ignorance and uncertainty in this area" and lay out the time it will take to address these.

(Reporting by Michael Kahn; Editing by Louise Ireland and Maggie Fox)

A New Day

Well it's off I go to work again on a crazy Monday. Overworked and underpaid as usual. Story of my life. I pray that Obama can institute something to help get me out of this mess.