Business News: Will Virgin America Fly?

Business News: Will Virgin America Fly?

Will Virgin America Fly?

Posted: 29 Dec 2010 02:00 PM PST

Sweet to Passengers: Shut Up, Adapt To Snow

Posted: 31 Dec 2010 07:51 AM PST

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By Doug Sweet

Dec. 31 (Bloomberg) -- As a very frequent traveler, I get tired of hearing the once-a-year airline passenger complaining about the hassle of flying, and how it’s all the fault of airlines. With air travel, a little common sense goes a long way.

My daughter and son-in-law were among those stranded in snowed-in New York City this week. They were to return to their home here in Birmingham, Alabama, on Sunday. They finally arrived on Wednesday.

Rather than subject themselves to the mass campout at LaGuardia Airport, they made plans to stay with my son-in-law’s aunt in Brooklyn when they realized the storm was coming. My daughter sought and got telephone and e-mail updates from Delta Air Lines about her flight status and cancellations. She booked these flights herself -- without any platinum or gold memberships in this or that -- so she was the average traveler, just a bit smarter.

A year ago, I was among the delayed travelers when another big snowstorm hit New York City, a week before Christmas. Our party of eight -- which included my wife, her sister, our daughter and four of our friends -- was scheduled to return home on Dec. 19. At first, Delta rescheduled us for one day later, Dec. 20. When we were rescheduled a second time, for Dec. 25 at 4 p.m., we decided it was time for Plan B.

I called Hertz and reserved two cars, and we made the 800- mile drive home. It was kind of fun.

No Surprise

This week, while traveling, I met a woman who told me she had gone to LaGuardia on Sunday and only then had found out that her flight was canceled. She camped at the airport for two days. The blizzard forecast was all over the news, so what did she expect?

I wonder whether the third-party Internet options for booking air travel these days make it harder for people to manage their flight plans and make changes when necessary. For my money and peace of mind, booking through the airline is best. Most airlines at least claim to guarantee lowest fares when booking directly.

Also, trying to stick with one airline, rather than shopping around for an itinerary that uses two or more airlines, gives even the infrequent traveler a little expertise. Go ahead and register for the frequent-flyer program so they know who you are. That’s why my daughter was getting phone calls and e-mail messages about cancellations well ahead of her intended departure.

Good Prices

Online booking has contributed to the low fares everyone is enjoying. Each carrier knows what the other charges and will reduce a ticket price by $1 if that moves it to the top of the list. Fifteen years ago, when I was traveling to New York City airports every other month, the fare was $900, no matter when I made the reservation and which airport I used. Recently I’ve paid $200 to $400 for the same flight, on the same airline.

Reduced fares, of course, have also meant reduced services, and that seems to include the capacity of airlines to deal with these rare problems. And the travel experience itself now resembles that on buses. But the planes are packed and the airlines are finally making some money.

Next time you’re in an airport, look at all of the families traveling. I travel by air more than 25 times each year -- that’s more than 100 individual flights, counting connections -- and my travel continued throughout the recession. The airports and planes were still full. I would get back home each week and tell my wife there was no recession in the sky.

So I don’t have a lot of pity for the so-called hassled passenger.

Thankful Traveler

During Thanksgiving the travel disaster de jour was supposed to be the security delays caused by fussing over full- body scanning. It never happened. I traveled the week before Thanksgiving, and again on the following Tuesday, with no problems, with on-time flights, and with no lost luggage.

I was delayed for five hours once at Los Angeles International Airport during one of the many security scares over suspected bombs. I reminded myself that the hassle I was experiencing was nothing compared with what people in the World Trade Center towers faced on 9/11, deciding whether to be burned to death or to jump to their death.

The 9/11 attacks ramped up all this security, and personally, I appreciate it. I don’t recall any more hijacked jets being crashed into office buildings since then.

(Doug Sweet is an engineer and consultant who specializes in production processes at paper mills. The opinions expressed are his own.)

--Editors: Laurence Arnold, Paul Tighe

Click on “Send Comment” in the sidebar display to send a letter to the editor.

To contact the writer of this column: dougsweet@cs.com

To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net

Storm May Cost Airlines $30 Million

Posted: 29 Dec 2010 03:29 PM PST

Suddenly, U.S. Is Where the Optimism Is

Posted: 29 Dec 2010 02:00 PM PST

U.S. Economy in `Expansion Mode'

Posted: 30 Dec 2010 08:37 AM PST

'New Normal' Missed Cue As Stocks Rallied

Posted: 31 Dec 2010 09:15 PM PST

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By Nikolaj Gammeltoft and Inyoung Hwang

Jan. 1 (Bloomberg) -- An improving global economy and record earnings are helping U.S. stocks defy predictions for a “new normal” of below-average returns.

The Standard & Poor’s 500 Index rose 13 percent in 2010, bringing the advance since March 2009 to 86 percent, the biggest rally for a comparable period since 1955, according to data compiled by Bloomberg and S&P. The benchmark equity index posted the largest gain for consecutive years since 1999.

“People are finally starting to say, ‘OK, maybe this growth is sustainable,’” said Mark Bronzo, who helps manage $21 billion at Irvington, New York-based Security Global Investors. “What we’re seeing at the end of the year is that earnings growth has been good and most people are conceding that it’ll probably be good in 2011.”

Pacific Investment Management Co. warned in May 2009 that returns on financial assets would trail historical averages because of government budget deficits and increased regulation. U.S. equities have returned 6.2 percent a year since 1900 before dividends, according to inflation-adjusted data compiled by the London Business School and Credit Suisse Group AG in Zurich.

The S&P 500 rose 0.1 percent to 1,257.64 this week, extending its biggest December rally since 1991 and boosting its 2010 gain to 13 percent after a 23 percent rise in 2009, the biggest two-year advance since the Internet boom in 1998 and 1999. The Dow Jones Industrial Average climbed 4.02 points, or less than 0.1 percent, to 11,577.51 this week, extending its yearly increase to 11 percent.

Caterpillar, DuPont

Caterpillar Inc., DuPont Co. and McDonald’s Corp. jumped more than 22 percent in 2010 to lead gains in the 30-stock Dow while consumer and industrial shares drove the S&P 500 to a valuation of 15.8 times reported profit, the highest price- earnings ratio since June. Stocks rallied after the Federal Reserve pledged to buy $600 billion in Treasuries to stimulate the economy.

“I remain profoundly bearish because we’re just kicking the can down the road,” said David Tice, president of Tice Capital and creator of Federated Investors Inc.’s Prudent Bear Fund. “Printing money has never been the way to prosperity. Can the market go a little higher? Yes, because it’s a fool’s game and it’s going to end badly. It’s just a matter of when.”

U.S. gross domestic product expanded 2.8 percent in 2010, according to the median estimate of 69 economists in a Bloomberg survey. Growth will slow to 2.6 percent in 2011 and increase to 3.2 percent in 2012, the forecasts show.

‘Old Normal’

Bill Gross, co-chief investment officer of Pimco, which manages the world’s biggest bond fund, said in a Dec. 3 radio interview on “Bloomberg Surveillance” with Tom Keene that the “old normal” was growth of 6 percent to 7 percent and the “new normal” is roughly half that. Mohamed El-Erian, the other chief investment officer at Pimco, said in an e-mail on Dec. 1 that the forecast has a 55 percent to 60 percent chance of coming true.

“We are running at a half-size-paper-airplane type of economy as opposed to one with stable wings and full thrusting jet engines,” Gross said.

The S&P 500 gained 6.5 percent in December, sending the gauge above 1,251.70 for the first time since Sept. 12, 2008, the last trading day before Lehman Brothers Holdings Inc. filed the world’s biggest bankruptcy and prompted a 46 percent drop for the benchmark gauge through March 9, 2009.

May 6 Crash

The stock index fell 16 percent between April 23 and July 2 after credit downgrades for Greece, Portugal and Spain spurred concern that global economic growth would slow. Investors started withdrawing money from stocks after the May 6 crash erased $862 billion of value in 20 minutes. About $90 billion has been removed from funds that buy American stocks, according to the Washington-based Investment Company Institute.

“You had kind of a perfect storm,” Michael Nasto, senior trader at U.S. Global Investors Inc., which manages about $3 billion in San Antonio, said of the May 6 crash. “It’s a positive that since then, nothing has happened and we continue to grind higher.”

Equities started rebounding in July as better-than- estimated earnings at companies from United Parcel Service Inc. to Apple Inc. and Ford Motor Co. lifted confidence the economy is recovering. The S&P 500 has surged 20 percent since Fed Chairman Ben S. Bernanke’s Aug. 27 speech in Jackson Hole, Wyoming, where he foreshadowed the second round of quantitative easing. The central bank said in November it will buy an additional $600 billion of bonds through June, expanding on record stimulus of $1.7 trillion in asset purchases.

‘Roller Coaster Ride’

“It was quite a roller coaster ride for the equity markets,” said Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC. “Even though the economic picture got cloudy off and on, the corporate picture continued to stay sunny and warm. Not only have corporations cleaned up their balance sheets to be in wonderful financial conditions, corporate profitability remained exceedingly healthy.”

More than 70 percent of companies exceeded analysts’ profit estimates in the third quarter. It was the sixth straight period that many beat projections, the longest stretch since at least 1993, Bloomberg data show. Balance sheets are the strongest on record, according to Goldman Sachs Group Inc.’s David Kostin, who cited data showing companies hold more than $1 trillion in cash, the most ever compared with the value of their assets.

Prediction of Rally

The benchmark gauge for American equities will rise 9.3 percent from its 2010 close to 1,374 in 2011, bringing the increase since the end of 2008 to 52 percent, the best return since 1997 to 1999, according to the average of 11 strategists in a Bloomberg News survey.

“It’s been a turnabout,” Luschini said. “With the state of the consumer seemingly not deteriorating anymore, coupled with the fact that we are in an economic recovery, the most economically sensitive or cyclical sectors should perform the best.”

S&P 500 companies reliant on discretionary spending by consumers -- including movie-rental service Netflix Inc. and online travel agency Priceline.com Inc. -- surged 26 percent as a group in 2010, the most among 10 industries.

Netflix, which joined the index on Dec. 17, more than tripled to $175.70 in 2010. The Los Gatos, California-based company boosted the number of users to 16.9 million in the third quarter, up 52 percent from a year earlier. Priceline, based in Norwalk, Connecticut, surged 83 percent to $399.55, bolstered by a rebound in hotel bookings and international travel.

Beating Estimates

Caterpillar, the world’s biggest maker of construction equipment, rose the most in the Dow, climbing 64 percent to $93.66 in 2010. The Peoria, Illinois-based company has exceeded the average analyst earnings estimate for seven straight quarters. DuPont, the chemical maker based in Wilmington, Delaware, surged 48 percent to $49.88 for the second-largest Dow average gain.

McDonald’s, based in Oak Brook, Illinois, advanced 23 percent, the most in three years, to $76.76. Sales at the world’s largest restaurant chain have risen for the past four quarters as Chief Executive Officer Jim Skinner lured customers with frappes and fruit smoothies.

As concern that the economic recovery would stall eased, the benchmark measure of using S&P 500 options to hedge losses dropped. The VIX, as the Chicago Board Options Exchange Volatility Index is known, tumbled to 17.75 from 2010’s high of 45.79 in May.

“The profitability and margins of U.S. corporations are significant,” said Stephen Wood, the New York-based chief market strategist for Russell Investments, which manages $149 billion. “Corporate earnings data is providing an increasingly positive trend, while the negatives continue to be the lingering information that is already known.”

--With assistance from Jeff Kearns and Whitney Kisling in New York. Editors: Nick Baker, Chris Nagi

To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net; Inyoung Hwang in New York at ihwang7@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.

Commodities Beat Stocks, Bonds, Dollar

Posted: 31 Dec 2010 03:20 PM PST

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By Debarati Roy

(Adds more details on stocks in second paragraph after “Financial Crisis” subhead.)

Dec. 31 (Bloomberg) -- Commodity prices beat gains in stocks, bonds and the dollar this year as China, the biggest user of everything from cotton to copper to soybeans, led the recovery from the first global recession since World War II.

The Thomson Reuters/Jefferies CRB index of 19 raw materials gained 17 percent. The MSCI All Country World Index of stocks rose 13 percent with dividends reinvested. Global bonds returned 4.7 percent as of Dec. 30, based on Bank of America Merrill Lynch’s Global Broad Market Index. The U.S. Dollar Index, a gauge against six counterparts, added 1.5 percent. The CRB outpaced the other measures for the first time since 2007.

Investors snapped up raw materials this year as China’s growth, the fastest of any major economy, spurred record demand for sugar and soybeans and rising imports of copper. At the same time, crops were ruined by Russia’s worst drought in at least a half century, flooding in Canada and parched fields in Kazakhstan, Europe and South America.

“This year has been incredibly strong,” said Nic Johnson, who helps manage about $24 billion in commodities at Pacific Investment Management Co. in Newport Beach, California. “You’ve had strong growth from China that put a bid into copper, and global crop problems cause huge rallies.”

This was the first year since 2005 that commodities, stocks, bonds and the dollar all rose as the global economic recovery proved resilient.

Cotton, Silver

Gains in the CRB were led by cotton, which surged 92 percent this year, reaching a record Dec. 21, on speculation that supply would fail to keep pace with rising demand in China. Silver, the precious metal most used in industry, jumped 84 percent as it attracted investors betting on both faster and slower economic growth. Corn added 52 percent and coffee climbed to a 13-year high as inventories shrunk and bad weather threatened crops in South America.

China’s economy expanded more than 10 percent this year, according the median of 18 economists’ estimates compiled by Bloomberg. While growth will slow to 9 percent next year, that will still be three times the rate of the U.S. and six the times the speed of the euro region, based on Bloomberg surveys of as many as 69 economists.

“There is no doubt that demand is coming from China, and there are other emerging markets where demand grew,” said James Paulsen, who oversees $350 billion as the chief investment strategist at Minneapolis-based Wells Capital Management. “Commodities have gone up because the economy was gearing up. It became a sustainable global economic recovery.”

Materials Rebounded

Raw materials rebounded in the last two quarters, with the CRB surging 29 percent since June 30. That’s the best second- half performance since the index debuted in late 1956. In the first six months, the gauge lost 8.8 percent.

Seventeen of 19 commodities tracked by the CRB rose this year. Natural gas lost 21 percent and cocoa fell 7.7 percent.

In December, the commodity gauge jumped 10 percent. That compares with a 7.3 percent advance for the MSCI All Country World Index and a 0.7 percent drop for bonds. The U.S. Dollar Index lost 2.1 percent. The Standard & Poor’s 500 Index added 6.7 percent with dividends reinvested, and returned 15 percent in 2010.

Returns for commodity investors may be lower than the spot CRB index suggests. The S&P GSCI Total Return Index, tracking the net amount received, rose 9 percent this year. When longer- dated contracts cost more than those for immediate delivery, a market structure known as contango, investors pay a premium to maintain their holdings as positions expire.

Financial Crisis

Stocks overcame the worst financial crisis since the 1930s as corporate profits exceeded estimates and central banks kept interest rates near record lows. Boeing Co., Home Depot Inc. and General Electric Co. beat earnings estimates for at least the past four quarters.

The Standard & Poor’s 500 Index rose 13 percent in 2010, bringing the advance since March 9, 2009, to 86 percent, the biggest rally for a comparable period since 1955, according to data compiled by S&P. The improving economy and record earnings sent the benchmark equity index to the largest gain in consecutive years since 1999, the data show.

Governments have taken unprecedented measures to spur growth and boost confidence, as concerns the debt crisis in Europe would derail the global recovery pushed the MSCI All World Index to a low of 262.64 on May 25. The index posted back- to-back monthly gains in September and October and is headed for the biggest December rally since 1999.

Lehman’s Collapse

The MSCI All World Index of developed and emerging stocks reached 330.9 on Dec. 29, the highest since Sept. 2, 2008, before the collapse of Lehman Brothers Holdings Inc.

“It’s good to be crossing the finish line with honorable returns,” said Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $340 billion. “The double dip did not occur. The unemployment situation in the U.S., while not improving, did not deteriorate further. Globally, Europe was able to prevent a worst-case scenario.”

U.S. Treasuries, benchmarks for borrowing costs around the world, returned 5.5 percent this year as of Dec. 30, rebounding from a 3.7 percent loss in 2009, Bank of America figures show.

Threat of Recession

Bonds rallied from January through August as the U.S. economy threatened to slide back into a recession. They trimmed gains in the last four months of the year, sliding as Federal Reserve Chairman Ben S. Bernanke implemented a plan in November to pump $600 billion into the market.

As of Dec. 30, Japanese bonds, the biggest debt market, returned 2.4 percent in 2010 as the central bank cut its benchmark interest rate to “virtually zero.” The rally was more than double the 0.9 percent gain in 2009, based on the Bank of America data.

Greece and Ireland, which sought financial bailouts this year, had the worst-performing bonds among the 26 sovereign markets compiled by the European Federation of Financial Analysts Societies and Bloomberg.

Corporate bonds worldwide returned 7.12 percent this year as of Dec. 30, compared with 16.3 percent in 2009, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. The debt has lost 0.82 percent in December, following a 1 percent drop in November. The securities are poised for the biggest quarterly decline since the three months ended September 2008.

The extra yield investors demand to own corporate bonds instead of government debt has declined to 169 basis points, or 1.69 percentage points, from 176 basis points on Dec. 31, 2009, the index data show. Spreads narrowed this month from 177 basis points on Nov. 30.

“Economies are up and some of the darkest fears of the pessimists did not come to fruition,” Creatura said. “The U.S. and global economies, while they’re not firing on all cylinders, are moving forward.”

--With assistance by Inyoung Hwang and Sapna Maheshwari in New York and Wes Goodman in Singapore. Editors: Millie Munshi, Patrick McKiernan

To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net.

Bankruptcy: For Cities, There Are Downsides

Posted: 29 Dec 2010 02:00 PM PST

California, NYC Issue Less Debt

Posted: 31 Dec 2010 05:24 PM PST

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By Brendan A. McGrail

Dec. 31 (Bloomberg) -- California and New York, the most- populous U.S. state and city, lowered their municipal bond offerings in 2010 even as fixed-rate borrowing by municipalities surged to the highest on record.

State and local governments offered a record of at least $400 billion of the bonds in 2010, according to data compiled by Bloomberg dating to 2004. Overall issuance, which includes variable-rate debt, climbed to $453.7 billion, up from $443.6 billion in 2009, Bloomberg data show.

The expiring Build America Bonds subsidy and the limited suspension of the alternative minimum tax helped boost this year’s volume, said Howard Cure, director of municipal research for Evercore Wealth Management LLC in New York, which has about $2 billion of assets under management. The end of those initiatives may limit issuance in 2011, he said.

“There was a rush to avoid the risk of not having the programs available,” Cure said. “This year was a bit of an aberration and has eaten into the issuance for next year.”

California sold $10.5 billion in bonds this year, about 60 percent less than in 2009, Bloomberg data show, as its budget was delayed for more than three months. New York City dropped its borrowing 18 percent to $5 billion in 2010 from $6.1 billion last year.

The Build America program, which includes a 35 percent federal subsidy on interest costs, expires today. Issuers across the U.S. moved up planned sales to this month to beat the deadline, making the last three months of 2010 the biggest quarter for Build Americas since their April 2009 inception, Bloomberg data show.

Build America Program

The securities were created under President Barack Obama’s stimulus legislation as a means of driving down borrowing costs for localities and funneling money to job-creating construction projects. More than $187 billion of them have been sold.

Of that total, about $123 billion have come this year, funding clean-water projects in Ohio, highways in Kansas, dormitories at Rutgers University in New Jersey and a new bridge spanning the San Francisco Bay.

California sold about $5.5 billion in Build Americas, the most of any issuer, Bloomberg data show. Illinois is second, with $3.2 billion, followed by New York City’s $3.1 billion.

Chicago, 14th overall, was the second-largest city issuer, with about $1.6 billion of the federally subsidized debt sold.

California brought about $4.5 billion in taxable and tax- exempt debt to market in November after the state’s budget was a record 100 days late because lawmakers disagreed on how to close a $19 billion gap. The spending plan for the year that ends in June is out of balance by $6 billion, according to the state’s Legislative Analyst’s Office.

New York

New York City’s projected budget deficit for fiscal 2012 may widen by $2 billion, to $4.5 billion, because cuts in state aid may be greater than forecast, Budget Director Mark Page said Dec. 6. The reduction in the city’s general-obligation borrowing doesn’t mean the city was using less debt to finance operations, Cure said.

“There were plenty of city enterprises that sold a lot of debt,” he said. “General obligations were down, but others were very active.”

New York City’s Transitional Finance Authority, Metropolitan Transportation Authority and Municipal Water Finance Authority are ranked fifth, seventh and eighth in issuance nationally, Bloomberg data show.

Municipal issuance in 2011 may drop to about $340 billion, Citigroup Inc. analysts said in a Dec. 13 research note. JPMorgan Chase & Co. analysts wrote on Nov. 24 that sales would drop to $345 billion without Build America Bonds.

A change in the political tenor with 30 new governors taking office may lead to more fiscally conservative policies and fewer debt sales, Cure said.

“There are a lot of places very cognizant of their budget woes,” Cure said. “It’s a perception issue. There’s a general philosophy they shouldn’t be borrowing as much.”

Following is a description of a pending sale of U.S. municipal debt:

METROPOLITAN WATER RECLAMATION DISTRICT OF GREATER CHICAGO, a wastewater utility that serves more than 5 million people, plans to sell as much as $500 million in taxable and tax-exempt debt next year. The offering will need to be re-authorized in January, so a new pricing date hasn’t been set, according to acting Treasurer Mary Ann Boyle. The bulk of the issue will be tax-free bonds, she said. The securities are top-ranked by all three major credit-rating companies. (Updated Dec. 28)

--With assistance from Martin Z. Braun in New York, Michael B. Marois in Sacramento and Darrell Preston in Dallas. Editors: Walid el-Gabry, Mark Schoifet

To contact the reporter on this story: Brendan A. McGrail in New York at bmcgrail@bloomberg.net;

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

Church Bomb Kills 21, Wounds 79 in Alexandria, Egypt

Posted: 01 Jan 2011 03:56 AM PST

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By Alaa Shahine and Mahmoud Kassem

(Adds analyst comments from fourth paragraphs, Mubarak comments from eighth.)

Jan. 1 (Bloomberg) -- At least 21 people were killed and 79 injured when a bomb exploded outside a Coptic Christian church in the Mediterranean city of Alexandria in the deadliest terrorist attack in Egypt since 2006.

The blast occurred after midnight as worshipers were leaving a New Year’s service, the Interior Ministry said in a statement on its website. “Foreign elements” appear to have been responsible for the blast, the ministry said, adding that it has beefed up security around churches nationwide “in light of the escalating threats from al-Qaeda to many countries.”

Al Qaeda’s branch in Iraq said in November it would attack Christian targets after it claimed Egypt’s Coptic Church was holding two women who had converted to Islam. The Church has denied this charge. No group has claimed responsibility for today’s blast.

The attack will worsen already tense relations between Muslims and Christians in Egypt, Amr El-Shobaki, an expert on Islamist groups at the Cairo-based Al Ahram Center for Political and Strategic Studies. Confrontations between the two communities have increased for several years.

“This will deepen the tension,” El-Shobaki said in a telephone interview today. The attack bears the “fingerprints” of al-Qaeda, he said. “It was either successful in planting a cell in Egypt or recruited individuals to carry out a single operation,” he said.

‘Cut Off the Hand’

The Egyptian government has previously said al-Qaeda has a limited presence in the country. Ayman Al-Zawahiri, Osama bin Laden’s top deputy, is Egyptian.

Egyptian President Hosni Mubarak vowed to find those responsible for the attack in a televised speech today. “We will cut off the hand of terrorism,” he said.

Police fought a war with Islamist militants, mainly in southern Egypt, during the 1990s. Attacks peaked in 1997 when militants killed more than 60 tourists in the ancient city of Luxor.

Today’s blast was the worst in Egypt since a series of bombings between 2004 and 2006 in the Sinai peninsula killed about 150 Egyptian and foreign tourists. Police blamed those attacks on a previously unknown Sinai-based group.

The explosion in Alexandria was likely carried out by a suicide bomber who was also killed in the blast, the Interior Ministry said.

Copts

The blast badly damaged other cars on the street, television footage showed. Scores of Copts, encircled by security forces, gathered before the church to protest the attack.

In January 2010, six Christians were killed in a drive-by shooting outside a church in southern Egypt, and in November police killed a protester during clashes with Copts triggered by a halt to the construction of a church.

Copts account for about 10 percent of Egypt’s population of 80 million people. The Coptic Orthodox Church was founded in Alexandria in the first century by Mark, one of the apostles of Jesus. After an Arab army conquered Egypt in the seventh century, Islam gradually became the country’s dominant religion.

Mubarak described the explosion as a “terrorist attack,” his spokesman Suleiman Awwad said in an e-mail. “The president, while expressing his condolences to the victims’ families, urges Egyptians Muslims and Coptic Christians alike to stand united against terrorism,” Awwad said.

Presidential elections in Egypt are scheduled to occur in September.

--Editors: Mike Harrison, Dick Schumacher

To contact the reporter on this story: Alaa Shahine in Cairo at asalha@bloomberg.net; Mahmoud Kassem at mkassem1@bloomberg.net

To contact the editor responsible for this story: Louis Meixler at lmeixler@bloomberg.net

North Korea Says Regional Tensions Should Be Defused

Posted: 01 Jan 2011 03:54 AM PST

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By Paul Tighe and Jungmin Hong

(Updates with comment from South Korean government in seventh paragraph.)

Jan. 1 (Bloomberg) -- North Korea, in a New Year message, said tensions with South Korea should be defused while calling for “intense combat training” for the North Korean army.

“The danger of war should be removed and peace safeguarded in the Korean Peninsula,” the state-run Korean Central News Agency reported, citing a New Year editorial carried by newspapers including Rodong Sinmun and Joson Inmingun. “If a war breaks out on this land, it will bring nothing but a nuclear holocaust.”

The editorial blamed South Korea and its allies for “reckless and wild behavior” such as mounting military exercises, saying the tense situation required the army to be prepared, KCNA reported today.

Tensions between North Korea and South Korea rose after the sinking in March last year of a South Korean warship, in which 46 sailors died. North Korea in November fired artillery shells at Yeonpyeong Island in the first such attack on South Korean territory since the 1950-53 Korean War.

North Korea rejected an international panel’s finding that the sinking of the Cheonan warship was caused by a North Korean torpedo and said its shelling in November was in response to military provocation by South Korea.

“Confrontation between north and south should be defused as early as possible,” KCNA cited today’s editorial as saying. “Dialogue and cooperation should be promoted proactively,” it said, including allowing free travel and exchanges between people from the countries.

Better Relationship

North Korea “appears to seek humanitarian aid and a better relationship with the South by calling for dialogue and cooperation with Seoul,” South Korea’s Unification Ministry said today in a statement in response to the New Year editorial. “The North also has an intention to stir up a rift among the South Korean people.”

North Korea yesterday accused South Korea of sabotaging relations between the countries after the government of President Lee Myung Bak said it would focus in 2011 on preparations for reunification.

South Korea’s Unification Ministry said on Dec. 29 the policy goals for 2011 would include preparations for unification, rather than the previous strategy of improving ties. The government aims to complete plans in the first half of this year on how South Korea could fund unity with North Korea and its 23 million people, Unification Minister Hyun In Taek said in an Oct. 20 interview.

The South Korean authorities should end their policy of confrontation, KCNA cited the editorial as saying.

‘Battle Ready’

South Korea’s Defense Ministry last week pledged to create a stronger military deterrent with “battle-ready” forces able to respond to attacks.

Lee replaced his defense minister and army head following the Nov. 23 artillery barrage of Yeonpyeong and vowed to strengthen the military and respond more harshly to any further North Korean attacks.

North Korea is “consistent in its stand and will to achieve peace in Northeast Asia and the denuclearization of the whole of the Korean Peninsula,” KCNA cited today’s editorial as saying. It will “strive to develop relations of friendship and cooperation with countries that are friendly toward us.”

Six-nation talks on dismantling North Korea’s nuclear program stalled in April 2009. The forum involves North Korea, South Korea, the U.S., Japan, China and Russia.

--Editors: Hugh Chow, Jim McDonald

To contact the reporters on this story: Paul Tighe in Sydney at ptighe@bloomberg.net; Jungmin Hong in Seoul at jhong47@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net

Lions Gate Says Icahn Must Disclose ‘Secret’ MGM Merger Plan

Posted: 01 Jan 2011 03:35 AM PST

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By Linda Sandler

Jan. 1 (Bloomberg) -- Lions Gate Entertainment Corp. said billionaire Carl Icahn must disclose a “secret” agreement he has with creditors of Metro-Goldwyn-Mayer Inc. about a possible merger of the two studios.

The Vancouver-based studio wants to continue its lawsuit against Icahn even though he no longer is attempting to acquire Lions Gate, it said in a filing in U.S. District Court in New York yesterday.

Lions Gate sued Icahn earlier this month, saying he was “secretly plotting” to profit from merging the studio with MGM while telling investors the deal would be a “debacle.” Icahn should correct his misstatements about Lions Gate and pay damages for interfering in its plans, it said.

Icahn asked a judge to dismiss the suit, saying his takeover tactics were now irrelevant. Lions Gate said the New York financier “cannot escape responsibility for false and misleading” disclosures about his plans to “facilitate” a merger between the two studios.

Lions Gate also wants to know about Icahn’s “side deal” with another large shareholder of the studio, Mark Cuban, about buying his shares, it said.

According to Lions Gate’s lawsuit, Icahn offered Cuban, co- founder of the TV network HDNet and owner of the Dallas Mavericks basketball team, “special consideration” for his agreement to tender a 5.4 percent stake in Lions Gate to Icahn as he tried to acquire the studio.

After Icahn challenged an earlier Lions Gate suit, saying it was relying on an anonymous source for information about the alleged pact with Cuban, the studio amended its complaint to say the source was Cuban’s business partner Joe Francis, producer of the “Girls Gone Wild” DVD series.

Icahn didn’t respond to a call seeking comment.

The case is Lions Gate Entertainment Corp. v. Icahn, 10-cv- 8169, U.S. District Court, Southern District of New York (Manhattan).

--Editors: Fred Strasser, Peter Blumberg

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

Australia to Boost Flooding Aid, Balance Budget, Gillard Says

Posted: 01 Jan 2011 03:35 AM PST

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By Joe Schneider

Dec. 31 (Bloomberg) -- Australia will boost aid to flood- stricken areas in the coal and sugar producing state of Queensland while sticking to a promise to return the budget to surplus by 2013, Prime Minister Julia Gillard said.

Forty one areas in Queensland in Australia’s northeast have now been declared natural disaster zones, with the flooded area bigger than France and Germany combined, according to Queensland Premier Anna Bligh.

“This is without a doubt a tragedy on an unprecedented scale,” Bligh told the Australian Broadcasting Corp.

Towns in Queensland, inundated by weeks of rain, have been cut off by water and thousands of people have been evacuated. Mines have shut, crops have been destroyed, rail lines have been cut and companies including BHP Billiton Ltd., Xstrata Plc, Rio Tinto Plc and Peabody Energy Corp. said they may not be able to fulfill contracted deliveries because of circumstances beyond their control.

Eleven sites in Queensland remained under a flood warning today, according to Australia’s Bureau of Meteorology. The bureau said showers and storms are forecast to continue across the region until at least Jan. 5. Bligh said yesterday she expects the flooding damage will be in the billions of dollars.

“This is a natural disaster across Queensland,” Gillard said in a televised news conference today from Bundaberg, a town about 220 miles north of the state capital of Brisbane.

The federal government will provide additional payments to people affected by the floods, with each adult being eligible to claim A$1,000 ($1,017) and each child A$400, Gillard said in a statement. The payments are subject to eligibility criteria.

The additional funding won’t affect the government’s plan to balance the budget, Gillard said.

Budget Surplus

“The budget will be back in surplus in 2012-2013 as promised,” she said at the news conference.

Suncorp Group Ltd., an Australian insurer and lender, said it has received about 1,450 claims since Dec. 24 and a cost estimate will be provided when claims in the affected areas are assessed.

“Claims numbers are expected to increase as waters recede and customers return to their homes,” the Brisbane-based insurer said in a statement today.

The Insurance Council of Australia said today it may have an estimate of the damage in Queensland early next week, based on the claims received by the industry.

As floods ravage Queensland, a tropical cyclone is forming off the nation’s Western coast. Apache Corp. suspended two oil fields and evacuated non-essential staff from the Varanus Island gas-processing plant because of the approaching storm.

Cyclone

A low system is expected to become a cyclone tomorrow morning after moving off the Kimberley coast, the Bureau of Meteorology said on its website.

In South Australia, authorities issued a “catastrophic bushfire danger” rating as temperatures were forecast to reach 41 degrees Celsius (106 degrees Fahrenheit) in Adelaide. Victoria issued a statewide fire ban. Temperatures in Melbourne, Victoria’s capital, hit 38 degrees Celsius today.

Evacuations continued in the flooded regions of Queensland.

“There are still people being evacuated from Emerald,” Chantelle Rule-Murphy, a spokeswoman at Queensland Emergency Management, said in a phone interview today. Emerald, with a population of 11,000, is about 800 kilometers (500 miles) northwest of the Sunshine Coast.

Gillard said she cancelled plans to visit Emerald after it became evident aviation fuel there was needed by rescuers. She visited the town of Rockhampton, near the eastern coast.

Theodore Evacuation

The town of Theodore, with 300 residents, yesterday became the first entire town to have been evacuated in Queensland because of floods.

The flooding comes after Australia had its wettest September-to-November spring on record. The last time Queensland’s Bowen Basin, where many of the affected mines are located, was hit with similar weather in 2008, coal tripled to a record $300 a ton, driving up the price of steel used in cars.

Before the recent rain, Queensland had its wettest spring since records began in 1900, receiving 248.2 millimeters (9.77 inches) of rainfall, almost triple the state’s average long-term mean of 84.3 millimeters, according to the bureau.

Australia is the biggest producer of coal used in steelmaking, contributing more than 40 percent of the global seaborne trade, according to Deutsche Bank AG. Queensland is the country’s biggest coal exporter.

The disruption in coal deliveries may lift global prices for the fuel, said James Rollyson, a Raymond James Financial Inc. analyst in Houston. The benchmark price for metallurgical coal was $209 a metric ton for a three-month contract that started Oct. 1, Kobe Steel Ltd. said.

The flooding may mean weather-damaged wheat and chick pea crops that have yet to be harvested in southern Queensland will be left in the fields, Wayne Newton, grains president of farmer group Agforce, said this week from Dalby. Some recently planted cotton and sorghum crops were under water, he said.

Cotton Australia estimates about 7,500 hectares of the crop planted near Theodore in the state’s east have been destroyed, Communications Manager David Bone said this week.

--With assistance from Elisabeth Behrmann in Sydney. Editors: Iain Wilson, Keith Gosman

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net.

To contact the editor responsible for this story: Iain Wilson at iwilson2@bloomberg.net

Discovery Communications Cancels Jackson Autopsy Show

Posted: 01 Jan 2011 03:35 AM PST

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By Rob Golum

(Updates with closing stock price.)

Dec. 31 (Bloomberg) -- Discovery Communications Inc. called off plans to air a re-enactment of pop singer Michael Jackson’s autopsy, citing the request of the late entertainer’s estate and the legal case against his doctor.

“Given the commencement of legal proceedings beginning next week, and at the request of Michael Jackson’s estate, the scheduled broadcast of the medical documentary related to Michael Jackson’s official autopsy has been postponed indefinitely,” Discovery said today in a statement.

A Discovery channel in Europe had planned to air “Michael Jackson’s Autopsy: What Really Killed Michael Jackson” next month, John Branca and John McClain, executors of the estate, said in a letter released Dec. 29. A hearing for Conrad Murray, the doctor accused of involuntary manslaughter in Jackson’s June 2009 death, is set for Jan. 4 in Los Angeles.

Discovery, the Silver Spring, Maryland-based operator of cable TV networks, fell 10 cents to $41.70 at 4 p.m. New York time in Nasdaq Stock Market trading. The Class A shares rose 36 percent in 2010.

“The co-executors of the estate of Michael Jackson are pleased that Discovery Channel made the correct decision in choosing to cancel this exploitative program,” Branca and McClain said in an e-mailed statement. “We are hopeful that this show will never run in any market in the future.”

--Editors: Chris Staiti, John Lear

To contact the reporter on this story: Rob Golum in Los Angeles at rgolum@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

For-Profit Colleges Charge More While Doing Less

Posted: 01 Jan 2011 03:35 AM PST

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By John Lauerman

(Updates education index in 29th paragraph.)

Dec. 31 (Bloomberg) -- Kimberly Connacher, a bank teller, tried to get to Modesto Junior College early enough each evening to beat about 44 other students to a seat and avoid having to stand through her English class.

It was the long, nighttime walk through the community college’s jammed parking lots in Modesto, California, that prompted Connacher to transfer about a year ago from the campus, where she paid about $80 a class, to Apollo Group Inc.’s University of Phoenix, where the cost was more than $1,000. She took out $12,000 in loans to cover the expense.

“I didn’t want to go to school at night, but that was all that was open at Modesto,” said Connacher, now 20, who earns $11 an hour. “The classes were crowded and hard to get into, my teachers seemed overwhelmed, and that was the last straw.”

As state budget cuts lock students out of community-college classrooms or force them to stand in class, for-profit colleges are attracting hundreds of thousands of poor and minority students, charging up to 10 times as much for the same degree.

The industry, including Washington Post Co.’s Kaplan University, has tripled enrollment to 1.8 million in the past decade by pouring billions of dollars into marketing and recruiting, offering flexible online classes and outfitting more-modern campuses while states slash funding for community colleges. As much as 90 percent of revenue at each for-profit college comes from federal student aid.

Minority Students

Today, one in seven minority students attends a for-profit college, as does one in four poor students who receive federal Pell grants for low-income families, according to the U.S. Department of Education and an industry group. Students in for- profit college programs graduate or stay in school less than those at community colleges, according to a study sponsored by the U.S. Department of Education and released this month.

Students in two-year programs at for-profit colleges are also eight times likelier to be in debt than those at community colleges, according to a report last month from the Education Trust, a nonprofit advocacy organization based in Washington.

“One of the reasons the for-profits have grown so much is that the community colleges are filled to capacity and even turning people away,” said Thomas Bailey, director of the New York-based Community College Research Center. Bailey provided information on community colleges for a White House conference on Oct. 5.

Budget Cutbacks

While President Barack Obama at the conference lauded the almost 1,200 U.S. community colleges as the “unsung heroes of America’s education system, Congress last year considered a $12 billion, 10-year-plan to support community colleges -- and cut it to $2 billion.

California and Virginia were among states that reduced community college budgets during the past two years, eliminating courses, capping enrollment and in some cases turning away students. Working adults, along with low-income and minority students, seek out community colleges because, unlike traditional four-year undergraduate programs, they offer two- year degrees and job training.

Community colleges have been inundated with applicants, said Bob Templin, president of Northern Virginia Community College, based in Annandale, Virginia. U.S. community college enrollment rose 17 percent over two years to 8 million in September 2009, according to the American Association of Community Colleges in Washington.

‘More Affordable’

“It’s been a tsunami,” said Templin, whose college’s enrollment has grown 13 percent to 72,563 since the 2007-2008 school year while state funding for the institution fell 21 percent to about $62 million. “More people are looking for job training because of the recession; more students are choosing community colleges over traditional colleges because they’re more affordable; and we have more adults looking for career- changing skills.”

For-profit colleges have targeted low-income and minority students who typically attend community colleges. The University of Phoenix in 2004 opened the two-year, online Axia College, which primarily attracts lower-income students who depend on federal financial aid. Axia now has more than 200,000 students. Phoenix spent $1.1 billion on sales and promotion of its programs in the year ended Aug. 31, Apollo said in a regulatory filing.

ITT Educational Services Inc., based in Carmel, Indiana, had 80,766 students at the end of last year and employs about 1,700 recruiters, according to a February regulatory filing. About 29 percent of the company’s $1.3 billion in revenue last year paid for advertising, recruitments and other student and administrative services, according to the filing.

$500 a Month

Amy Shope, 23, was making $500 a month as a waitress and looking for a better life for her 14-month-old daughter, Kalani, when she began thinking about a degree in visual communications. She considered attending J. Sargeant Reynolds Community College in Richmond, Virginia, her hometown, where she would have paid $117.60 a credit hour.

Attracted by television advertisements, Shope bypassed the community college for ITT Educational’s Richmond campus, which charges as much as $468 a credit hour. After two semesters, she owes about $11,000 and is getting ready to transfer to Reynolds to avoid racking up more debt, she said.

“I felt like I was doing something with my life, getting a better future for my baby,” said Shope, who is the first in her family to attend college. “The recruiters talked so fast and all I saw was college. That’s all I could hear.”

Pell Awards

Lauren Littlefield, a spokeswoman for ITT Educational, declined to comment.

For-profit colleges took in $7.6 billion last year in Pell Grants -- federal higher-education money for low-income individuals -- more than triple the amount in 1998-1999, according to Education Department data. In the 2008-2009 school year, about 25 percent of the 6 million students who got Pell money attended a for-profit college, according to the department. About 13 percent of minority students attend for- profit colleges, according to the Association of Private Sector Colleges & Universities, a Washington trade group.

For-profit colleges receive a growing share of grants for poor students because their officials ensure that students apply for funds, said Harris Miller, president of the trade group. A 2009 study showed that while fewer than half of eligible students at community colleges fill out and send in forms for the grants, for-profit colleges make certain that more than 95 percent of their eligible students seek the funds, he said.

No Apology

“I don’t think we should have to apologize for that,” Miller said in an interview Dec. 17. “The community colleges should apologize for not serving the needs of their students.”

For-profit colleges are succeeding because they quickly develop programs to prepare students for expanding job opportunities, said Robert Silberman, chairman and chief executive officer of Strayer Education Inc., based in Arlington, Virginia.

The colleges also control costs and quality by using mostly part-time, nontenured faculty members whose contracts can be terminated when courses empty or teachers burn out, Silberman said in an interview at the Washington campus of for-profit Strayer University.

Muted Yellow

Strayer’s student population has grown almost sevenfold, to about 56,000, since 1996 when the company made its initial public offering of shares. Strayer is planning to expand throughout the U.S. from the east and southeast, where most of its campuses now are located, Silberman said. For-profit colleges more than tripled their U.S. enrollment to 1.8 million in September 2008, from 550,000 a decade earlier, according to the Education Department.

At Strayer’s Washington campus, Silberman points to walls painted muted yellow because studies showed the color aids student concentration. Every hallway is adorned with pictures of students in graduation caps and robes. Computer terminals are available for student use in the library and a resource room.

Rather than costlier individual offices, the campus offers one room of about 20 carrels to part-time teachers as a group. There is no cafeteria. The focus is on educating students, Silberman said.

“Traditional college presidents are always asking me, ‘How can we be more like you?’” Silberman said. “I’ve had at last three Ivy League college presidents ask me that.” Silberman declined to name the presidents from the Ivy League of eight northeastern-U.S. universities.

Recruitment Curb

The federal government is tightening regulations. The Education Department this year banned for-profit colleges from paying recruiters on the basis of how many students they enroll. The department also has proposed to cut off aid to for-profit colleges if their graduates don’t earn enough to pay off student loans.

The department has set a nationwide cap of 5 percent on the proportion of for-profit college programs that could be shut off from government loans in 2012, the first year of the rule’s implementation. For-profit colleges have said that hundreds of thousands of students might lose access to needed training programs when the rule goes into effect. The regulatory threat helped drive down an index of industry shares by 24 percent this year.

Apollo’s University of Phoenix, Washington Post’s Kaplan and other for-profit colleges are scaling back recruitment and introducing remedial and introductory programs designed to address federal concerns and improve graduation rates.

Business Incubator

LaGuardia Community College, part of the City University of New York, epitomizes challenges facing community colleges: crowding, funding shortfalls and competition from the for-profit colleges.

LaGuardia, situated in the Long Island City section of Queens, calls itself “the community college that’s 10 minutes from Times Square” by subway. Students can apply for internships at a small-business incubator that gets funding from New York-based Goldman Sachs Group Inc., and LaGuardia’s professors won a $50,000 grant in November from the National Aeronautics and Space Administration to help students research global warming.

LaGuardia has 17,028 students, 50 percent more than a decade ago. At least 73 percent are minorities, and more than half get financial aid.

The campus capped enrollment this year, turning away about 1,000 applicants, said Michael Baston, acting vice president of student affairs. Students say they frequently have to wait a semester or longer to get into math and science courses.

August Closing

“Every year we close enrollment earlier,” Baston said in an interview in his office. “Last year we closed it in mid- August, this year it was early August.”

LaGuardia owns 340,000 square feet (32,000 square meters) of unused former factory space and doesn’t have the budget for renovations needed to create classrooms, said Tom Gaimaro, interim director of the college’s facilities, design and construction department.

“I don’t have heat, I don’t have walls, I need elevators to move people up and down,” said Gaimaro, looking around the skylit empty top floor of an unfinished building.

LaGuardia spent $631,000, or less than 1 percent of its $158 million budget, on marketing and advertising this year, mostly for community outreach and for posters on buses and on the No. 7 subway line that passes in front of the college.

DeVry Inc., an Oakbrook Terrace, Illinois-based for-profit education company with a Queens campus, spent $224 million, or 12 percent of its fiscal 2010 budget, on advertising nationally, according to a regulatory filing.

Nursing Slots

Orquidea Mejia, the daughter of immigrants from the Dominican Republic living in Brooklyn, didn’t know how much cheaper her tuition at LaGuardia Community College would be than at the Queens campus of DeVry -- $3,150 compared with $14,640 -- until she transferred. She said she still owes $14,000 for loans she took out to attend DeVry.

While Mejia said she loves LaGuardia, she will have to compete to get into a registered-nurse program that has only 70 spaces each semester and takes students with the highest grades. A second program, in licensed practical nursing, also has limited space. Math and science courses that she needs to get into the nursing programs are crowded, she said.

“In my first semester, I started late and all the classes I wanted were taken,” Mejia said. “I got into biology in my second semester.”

California’s community college system, the largest in the U.S., with about 2.8 million students, turned away at least 140,000 applicants last year as the Sacramento-based system’s allocation of state funds dropped 8 percent to $6 billion, Chancellor Jack Scott said. Course offerings were cut 6.3 percent.

‘Tragedy’ for Students

“I’ve never seen us go through quite as tough a time for meeting the needs of students and flat not having the resources to do it,” Scott said in a telephone interview Nov. 22. “It’s a tragedy for the students and it’s going to be a tragedy for the economy of California because we’re going to have less of the trained personnel we need to fill jobs.”

Concerned that capacity wasn’t sufficient, Scott made a deal last year with Kaplan, allowing students who couldn’t fit into the California system to get a price break if they enrolled at Kaplan. Even with the discount, Kaplan was charging about 10 times the community college’s tuition.

Scott canceled the agreement in August when other systems in the state -- the Oakland-based University of California and the Long Beach-based California State University -- refused to recognize Kaplan’s course credits from transfer students.

Quality Question

“I think they questioned the quality of the Kaplan courses,” Scott said. “As more and more problems arose, and we began to worry about students not getting good training and having to borrow a lot of money, we began to think this wasn’t really part of our mission.”

Kaplan has regional accreditation and hundreds of its graduates have transferred to California state colleges, the company said in an e-mailed statement. Kaplan has agreements to transfer credits with 70 community colleges in California and more than 500 across the U.S., according to the statement.

“Kaplan offered a solution that could have increased access for California students and would have presented California legislators with another option for solving California’s educational challenges,” according to the statement.

Moving to Merced

For her part, Kimberly Connacher -- the bank teller who quit attending Modesto -- said she has found a spot enabling her to return to California’s community college system next year after leaving the for-profit University of Phoenix to keep debts from mounting. This time, instead of going to classes in Modesto, she’ll be attending Merced College in Merced, California, where she won’t be borrowing any money, she said.

“I’ll be able to work full time and still go to school, and I won’t have to worry about whether I’m getting into my classes,” Connacher said.

As community colleges struggle to meet the demands of an expanding student population, they might learn from techniques that have helped for-profit colleges grow, said Tom Snyder, president of Ivy Tech Community College, the Indianapolis-based statewide system for Indiana.

Snyder said he’s using more online courses to have the flexibility of colleges such as the University of Phoenix, which can instantly add students and allow them to pursue classes, whenever and wherever they like, through the Internet.

Flexibility Urged

About 75 percent of Ivy Tech’s 200,000 students are adult learners who are changing professions or trying to improve job prospects, Snyder said. Such students need flexibility to juggle job and family expectations, he said.

“It’s very similar to the population targeted by the for- profits,” Snyder said. “Many of them have the option of 24/7 scheduling, and that’s what we want to give our students.”

Community colleges need to learn to help students stay in school until they obtain degrees or professional credentials, Snyder said.

The budgets at community colleges are unlikely to resume growing until states’ finances improve, and both Democrats and Republicans in Congress are suggesting that, to meet demand for training and education, for-profit colleges will need to retain access to student-aid programs.

The Education Department is proposing to measure the quality of for-profit colleges by tracking former students’ incomes and ability to repay loans. Colleges that fail to hit benchmarks risk losing eligibility for student financial aid.

Quality Index

John Kline of Minnesota, who will become chairman of the House education committee in January, said all colleges, including for-profits, should be required to disclose accurately to students how much their programs cost, how much debt students are likely to take on, and job-placement results.

Kline favors use of the Educational Quality Index, a rating system proposed by Democratic Representative Robert Andrews of New Jersey that would compare colleges according to their job- placement success, graduation rates, and loan-repayment records. Colleges that fail to meet benchmarks would lose eligibility for financial-aid programs.

Meeting the standards would keep the money flowing, Andrews said in a telephone interview.

“If a school takes unemployed people and turns them into taxpayers who pay their loans back, I don’t care how much financial aid they use,” Andrews said.

--Editors: Robin D. Schatz, Jeffrey Tannenbaum, Andy Davidson

To contact the reporter on this story: John Lauerman in Boston at jlauerman@bloomberg.net.

To contact the editor responsible for this story: Jonathan Kaufman at jkaufman17@bloomberg.net

Rattner to Pay $10 Million to Resolve Cuomo Pension Fund Probe

Posted: 01 Jan 2011 03:33 AM PST

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By David McLaughlin

Dec. 31 (Bloomberg) -- Steven Rattner, a co-founder of the private-equity firm Quadrangle Group LLC, will pay $10 million to settle kickback allegations involving New York’s pension fund, less than half of the $26 million state Attorney General Andrew Cuomo sought in a lawsuit.

Rattner also agreed to be banned from appearing “in any capacity” before any public pension fund in the state for five years, the attorney general’s office said yesterday in an e- mailed statement. Cuomo, New York’s governor-elect, sought a lifetime ban from the securities industry.

“I am gratified that we have been able to reach an agreement in this case, as it resolves the last major action of our multiyear investigation,” Cuomo said in the statement.

Rattner, 58, helped overhaul General Motors Co. and Chrysler Group LLC when he headed the U.S. government’s Automotive Task Force. He said in the same statement he was “pleased to have reached a settlement.”

“I apologize if during the course of this process there is anything I did that may have made reaching this agreement more difficult,” he said. “I respect the work of the attorney general and his staff to ensure that the New York State Common Retirement Fund operates properly and in the best interests of New Yorkers.”

Davidson Goldin, a spokesman for Rattner, said the agreement with Cuomo says Rattner is settling “without any admission as to liability.” Cuomo spokesman Richard Bamberger didn’t respond to an e-mail seeking a copy of the settlement.

‘Close to Extortion’

Rattner and Cuomo’s office have traded jabs over the attorney general’s lawsuit since it was filed on Nov. 18. In an interview on the Charlie Rose television show, Rattner called Cuomo’s lawsuit “close to extortion.”

“He has basically threatened me all along the way that if I don’t do what he wants me to do, he will prosecute me to the ends of the earth,” Rattner said.

Bamberger last month called Rattner’s claims that he did nothing wrong “ridiculous” and said the financier repeatedly cited his constitutional protection against self-incrimination when questioned.

“Mr. Rattner now has a lot to say,” Bamberger said in a statement Nov. 18. “But when he was questioned under oath about his pension fund dealings he was much less talkative, taking the Fifth and refusing to answer questions 68 different times.”

In an interview with Capital Tonight on Nov. 18, Cuomo said Rattner “is in many ways the worst example of this fraud.”

Kickbacks Paid

Rattner, who is no longer with Quadrangle, caused the New York-based firm to pay kickbacks to obtain $150 million in investments from the pension fund, according to Cuomo’s civil securities-fraud suit. Rattner also was accused of setting up a DVD distribution deal for a movie produced by the brother of a pension fund official.

Rattner last month settled a parallel probe with the U.S. Securities and Exchange Commission for $6.2 million and a two- year ban from associating with broker-dealers or investment advisers.

With the Rattner agreement, Cuomo has secured deals with 19 firms and five individuals, garnering more than $170 million for the state and the pension fund, he said in the statement. The investigation has led to guilty pleas by eight people, including former Comptroller Alan Hevesi and his chief political consultant Henry “Hank” Morris.

“Through the many cases, pleas and settlements in this investigation, I believe we have been able to help restore and protect the integrity of the state pension fund,” said Cuomo, who has been investigating corruption at the state pension fund for more than three years.

New York’s Governor

The settlement with Rattner largely resolves one of Cuomo’s biggest investigations just as he is set to leave office to become New York’s governor. Those who have pleaded guilty have yet to be sentenced.

Other cases he leaves behind for his successor, Eric Schneiderman, include a fraud case against Bank of America Corp. and former Chief Executive Officer Kenneth Lewis over the bank’s purchase of Merrill Lynch & Co. The office also has lawsuits pending against Charles Schwab Corp. over auction-rate securities and against Ernst & Young LLP. The accounting firm was accused by Cuomo of helping Lehman Brothers Holdings Inc. deceive investors about its financial condition before its 2008 collapse.

“Steve has said all along he wanted to put this behind him and the attorney general clearly wanted to resolve this matter before he leaves office,” Goldin, Rattner’s spokesman, said in an interview.

Rattner has handled the personal and philanthropic finances of New York Mayor Michael R. Bloomberg, whom Rattner supported through his chairmanship of Democrats for Bloomberg during the 2005 re-election campaign. Bloomberg is the majority owner of Bloomberg LP, the parent of Bloomberg News.

--With assistance from Steven Fromm and Karen Freifeld in New York. Editors: Fred Strasser, David Rovella

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.