Business News: No Rest for Retirees

Business News: No Rest for Retirees

No Rest for Retirees

Posted: 18 Dec 2010 04:52 AM PST

Secret Financial Weapons of the Super-Rich

Posted: 14 Dec 2010 02:24 PM PST

The New Normal Is So Normal

Posted: 16 Dec 2010 02:00 PM PST

The New Normal

Posted: 16 Dec 2010 11:40 AM PST

Google Aims Twin Daggers at Microsoft’s Heart

Posted: 16 Dec 2010 01:15 PM PST

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By Rich Jaroslovsky

Dec. 17 (Bloomberg) -- Forget about Google Inc.’s struggle with Facebook for eyeballs and programmers. Pay no attention to its fight with Apple Inc. over smartphones, or to any other tech rivalry.

The search giant’s war with Microsoft Corp. is The Big One, the confrontation that will determine what kind of future Microsoft has, and maybe if it even has a future. And the two new weapons Google unsheathed last week carry an unmistakable message of mortal peril.

First came the Nexus S, the new Google-labeled smartphone and the first to run “Gingerbread,” Google’s latest Android operating system. Then came a plain black laptop called the Cr- 48, the first computer to run the company’s Web-based Chrome Operating System.

On the surface, neither seems particularly menacing. The Nexus S, made by Samsung, is the successor to one of the most hyped and least successful products of 2010, the lovely and ill- fated Nexus One. And the Cr-48 isn’t even for sale. It’s a generic prototype that Google is making available to thousands of developers, companies and others to get them familiar with the concept of the new operating system before commercial versions from manufacturers such as Samsung Electronics Co. and Acer Inc. show up next year.

Enormous Threat

Still, the two devices represent an enormous threat to Microsoft and its chief executive officer, Steve Ballmer. The success of Android is rapidly foreclosing Microsoft’s growth prospects as more computing is done on mobile devices. Meanwhile, Chrome OS takes dead aim at its great twin cash cows: the Windows and Microsoft Office franchises.

Of the two new offerings, the Nexus S is the one most visible to consumers. The phone went on sale in the U.S. yesterday at Best Buy Co. stores and online for $199 on a two- year contract from Deutsche Telekom AG’s T-Mobile USA, and for $529 with no contract.

The phone, a variation on Samsung’s popular Galaxy S line, comes with a gorgeous four-inch touch screen, front- and rear- facing cameras for video chatting and a passel of Google apps and services. Its potential killer application is Near Field Communication, a technology that allows it to read encoded information from special chips that can be embedded in signs, on T-shirts or other objects.

Mobile Payments

Putting NFC support into Android is the biggest step yet toward using the mobile phone as a way of paying for things. And it comes at a time when Microsoft is still playing catch-up. Having frittered away its early strength in smartphones, it suffered a series of stumbles, including a line of youth- oriented phones called Kin that it introduced this year and pulled from the market after less than two months. Its latest effort, the Windows Phone 7 operating system, is a great improvement -- but still lacks such basics as cut-and-paste functionality.

It’s possible for Google and Apple to both succeed in mobile phones. It’s harder to imagine Google and Microsoft both thriving. Google’s business model, which calls for getting manufacturers to use its operating system, is far closer to Microsoft’s than to Apple’s strategy of making money on the sale of proprietary hardware. And, of course, Google offers Android to manufacturers at a price that Microsoft can’t beat: free.

While Android is all about limiting Microsoft’s future, Chrome OS takes dead aim at its present: the Windows and Office businesses that, in the quarter that ended Sept. 30, earned $6.7 billion of the company’s $7.1 billion in operating income.

In the Cloud

At first glance the Cr-48 -- Cr being the symbol for the element chromium -- looks like a basic laptop. The differences become evident once you turn it on. With no large programs or device drivers to load, it boots in 15 seconds. The operating system is, essentially, just a Web browser that you can never close. Forget about a hard drive: Everything you use, all your programs and all your data, reside in the cloud, on Google’s distant servers. And it uses not a bit of Microsoft software.

Nor is Microsoft the only one threatened. What kind of chip powers the Cr-48? Who cares? For the record, the Cr-48 has an Atom microprocessor from Intel Corp., but it’s no more relevant than what kind of chip powers your smartphone. How about makers of flash memory chips, like Toshiba? A Chrome OS machine needs little -- the Cr-48 has only 16 gigabytes -- since nothing is stored on the computer itself.

Useless Brick

Chrome completely commoditizes the hardware; the only things that count are being connected to the Internet, and at what speed. For now, that’s Chrome’s biggest weakness. While the Cr-48 works either over a Wi-Fi network or its built-in Verizon Wireless 3G service, you can’t always count on getting a connection. On a cross-country flight this week, the Cr-48 was a useless, inert brick.

On the other hand, that isn’t likely to be a permanent condition as Internet connections become ever more ubiquitous. Some airlines, such as Virgin America Inc., have already started rolling out onboard Wi-Fi.

Since Chrome OS, like Android, is free, it’s logical to ask what Google gets out of it. Company executives talk about the benefits of tying users to Google services and gaining valuable data to help refine its search algorithms. It remains to be seen whether those users will be troubled by the privacy implications and whether Google’s business model will work for manufacturers.

You can’t help thinking that the real point of Chrome is the threat it poses to Windows. From its founding, Google has defined itself as the anti-Microsoft. Its “don’t be evil” corporate mantra never needed to specify what it meant by “evil,” because everyone already knew. The fact is, Google doesn’t actually need Chrome OS to succeed. Microsoft, though, desperately needs it to fail.

(Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.)

--Editors: Steven Gittelson, Laurence Arnold.

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To contact the writer of this column: Rich Jaroslovsky in San Francisco at rjaroslovsky@bloomberg.net.

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

Mafia Victims' Families Fight Violent Video Games

Posted: 17 Dec 2010 05:36 AM PST

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By Chiara Remondini

(Adds Take-Two results in fifth paragraph.)

Dec. 17 (Bloomberg) -- The Mafia killed Sonia Alfano’s father, Sicilian journalist Beppe, on Jan. 8, 1993. Now she’s fighting against video games that she says trivialize violence and murder.

A member of the European Parliament, Alfano opposes games such as “Mafia II” by Take-Two Interactive Software Inc., whose investors include billionaire Carl Icahn. The sequel to 2007’s “Mafia” for personal computers, Microsoft Corp.’s Xbox 360 and Sony Corp.’s PlayStation 3 lets players take on the role of Vito Scaletta, who rises through the organization’s ranks, going from petty robberies to mob hits, gunfights and combat.

“It really, really hurts,” Alfano, who’s also the president of Italy’s association for the families of Mafia victims, said in an interview. “We can’t allow this to happen, our wounds are still too fresh.” She asked the European Commission last week to consider banning the games.

About 26 percent of titles sold in the U.S., the biggest market for video games, in the 10 months ended October carried an M rating for mature content, up from 16 percent a year earlier, according to Anita Frazier, an analyst at industry tracker NPD Group Inc. That amounts to $5.54 billion in sales.

Titles including Mafia II were among the strongest contributors to the 32 percent increase in net revenue in the fourth quarter ended Oct. 31, Take-Two said yesterday.

Language, Violence Warning

Before the results were released, Mike Hickey, an analyst at Janco Partners Inc. in Greenwood Village, Colorado, wrote in a note that Take-Two may sell about 1.27 million copies of Mafia II in its fiscal year, bringing in $55 million and making it the New York-based company’s fourth best-seller in terms of revenue. Take-Two’s shares have risen 19 percent in 2010, outperforming the 12 percent gain in the Russell 3000 Technology Index.

Mafia II’s M warning comes from its gore, violence and strong language. In Europe, the Pan European Game Information rates it 18+ and warns against violence and bad language. The game has the greatest number of instances of the “f-word” among video games with 397 in the 75,000-word script and 15-hour single-player story, according to Guinness World Records Gamer’s Edition 2011.

“‘Mafia II’ tells a compelling story about organized crime in America -- a subject that for decades has been featured in award-winning movies, television shows and novels such as ‘The Godfather’ and ‘The Sopranos,’” said Alan Lewis, Take-Two’s vice president for corporate communications and public affairs. “We fully and completely stand behind our creative teams and products, including ‘Mafia II.’”

‘The Godfather’

Italian-American organizations opposed the release of Mafia II in August, said Andre DiMino, chief media officer of New Jersey-based Italian-American group, UNICO.

Electronic Arts Inc., the second-largest U.S. video-game company, has published titles based on “The Godfather” novel by Mario Puzo that was made into a film by Francis Ford Coppola.

“Movies and games reflect the allure and repulsion that people feel toward violence,” said Janet Murray, a professor of Digital Media at the Georgia Institute of Technology in Atlanta. “Games raise special anxieties because they are active and participatory.”

The Sicilian Mafia, or Cosa Nostra, is the most tightly knit and best known. It has existed since the middle of the 19th century, historians say. There were on average 116 Mafia and organized-crime killings a year in Italy between 2004 and 2008.

Gaming companies are becoming more sensitive to opposition in Europe to violent games. Microsoft introduced a Pan-European website called Play Smart, Play Safe this month that helps families determine what video and online games to buy.

Wide Range

“We have to deliver a platform that can offer the widest range of entertainment experiences possible,” Andrew House, head of Sony Corp.’s game unit in Europe, said in an Oct. 15 interview. Sony creates a “good balance” between games for mature users while delivering others like “Gran Turismo 5,” a car racing simulator play, for a broader audience, he said.

While violent content is generally rated by the likes of the Entertainment Software Rating Board, themes in games are more difficult to monitor, said William Lugo, a professor of sociology at the Eastern Connecticut State University in Willimantic.

“The only message within video games that is highly regulated is violence,” he said. “The harder and more complex messages, such as those having to do with race, politics, or in this case the Mafia, are outside the realm of responsibility of game companies.”

The video-game industry may become more socially responsible as it matures, Lugo said, a development the Mafia victims’ association’s Alfano would welcome.

“These games transform the Mafia, a reality of death and destruction, into a thrilling and hands-on virtual pastime,” she said. “Even if momentarily, players identify with brutal killers and for us who have experienced violence firsthand, it’s appalling.”

--With assistance from Cliff Edwards in San Francisco and Flavia Rotondi and Giovanni Salzano in Rome. Editors: Vidya Root, Simon Thiel

To contact the reporters on this story: Chiara Remondini in Milan at cremondini@bloomberg.net

To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net.

British Airways Cancels London Flights as Snow Blankets Europe

Posted: 18 Dec 2010 02:51 AM PST

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By Tim Barwell

Dec. 18 (Bloomberg) -- British Airways Plc said all flights departing from London Heathrow and London Gatwick were canceled between 10 a.m. and 5 p.m. local time as snow blanketed western Europe over the last weekend before Christmas.

As much as 15 centimers (six inches) of snow fell in southwest England and “further significant accumulations” are likely, the U.K.’s Met Office said on its website.

“The Met Office forecasts a lot of snow for the area and on that information, rather than passengers coming to the airport and having to wait, we’ve canceled the flights,” Philip Allport, a spokesman for British Airways, said by telephone.

The snow also affected airports in Germany and the Netherlands. The freezing conditions will “severely disrupt” business for retailers, as well as parcel deliveries, research company Planalytics said yesterday.

Amsterdam’s Schiphol airport said “dozens” of flights will be delayed or canceled today because of snowfall in the Netherlands and neighboring Belgium and Germany. The airport currently uses two out of six runways, Antoinette Spaans, a spokeswoman for Schiphol Airport, said by telephone today.

Frankfurt airport canceled 129 flights as of 9:40 a.m. local time and expects the number to increase, said Timo Ross, a spokesman for operator Fraport AG. Yesterday, 560 of the hub’s 1,400 flights were annulled.

According to an estimate by Lufthansa AG, 2,500 passengers were stranded in Frankfurt yesterday, Ross said.

“We advise all passengers to travel to the airport if their flights have been confirmed,” he said.

--With assistance from Karin Matussek in Berlin. Editors: Rob Verdonck, Mike Harrison

To contact the reporter on this story: Tim Barwell in London at tbarwell@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

British Airways Says All Heathrow Flights Cancelled Due to Snow

Posted: 18 Dec 2010 12:10 AM PST

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By Mike Harrison

Dec. 18 (Bloomberg) -- British Airways Plc said all flights departing from London Heathrow have been cancelled between 10 a.m. and 5 p.m. local time today.

“Severe disruption is expected today at all London airports,” the airline said in a statement on its website today. “As a result all flights departing from London Heathrow will be cancelled.”

To contact the editor responsible for this story: Mike Harrison at mharrison5@bloomberg.net

South Korea May Delay Drill to Next Week Amid North Korea Threat

Posted: 17 Dec 2010 10:00 PM PST

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By Frances Yoon

Dec. 18 (Bloomberg) -- South Korea said it may not be able to conduct an artillery drill this weekend because of bad weather, even as North Korea warned it would retaliate if the exercise took place.

A spokesman at South Korea’s Joint Chiefs of Staff, who declined to be named because of military policy, made the comments by telephone today in Seoul. South Korea was planning to conduct the exercises between today and Dec. 21, a spokesman at the Joint Chiefs said yesterday.

North Korea said retaliation for the drill would be “deadlier” than on Nov. 23 when it responded to a South Korean artillery exercise, according to a statement yesterday by the state-run Korean Central News Agency. A barrage of shells from North Korea hit South Korea’s Yeonpyeong Island killing two civilians and two soldiers, setting 30 houses ablaze and scorching 25 hectares (62 acres) of land.

North Korea’s firing on Yeonpyeong was the first shelling of South Korean soil since the 1950-1953 war. While South Korea has said its maritime firing exercises are routine, North Korea called the South Korean exercise on Nov. 23 a “reckless military provocation.”

There is cloud and a chance of rain tomorrow in Incheon, the closest major South Korea port to Yeongpyeong Island, the Korea Meteorological Administration said on its website today.

‘Perfectly Legitimate’

U.S. State Department spokesman Philip J. Crowley said the latest planned drill “is a perfectly legitimate step” by South Korea. About 20 U.S. military personnel will be sent to the island to assist, said a South Korean defense ministry official who declined to be named, citing government policy.

China opposes any action that may lead to the escalation of tensions or destabilization on the peninsula, Xinhua News Agency reported today, citing Chinese Foreign Ministry spokeswoman Jiang Yu.

South Korea’s Unification Minister held a meeting early today to review the situation at its industrial park and Mt. Geumgang resort, which is located in North Korea, Yonhap News said, citing an unidentified ministry official.

The ministry is “closely watching” the situation and is reviewing emergency measures after North Korea’s threat to respond to South Korean artillery drills, Yonhap said.

South Korea issued a warning to civilian ships yesterday on the website of the Korea Hydrographic and Oceanographic Administration.

‘Shameless Saber-Rattling’

North Korea doesn’t recognize the western sea border demarcated by the United Nations after the war and demands it should be drawn further south to include Yeonpyeong and neighboring islands in North Korean waters.

“No one in the world would allow those who drew a line inside other’s court, without its owner’s knowledge, and insist it belongs to them and shamelessly conduct saber-rattling to preserve it,” KCNA said in its statement yesterday.

Retaliation to any further attack would include airstrikes, South Korea’s Defense Minister Kim Kwan Jin said on Dec. 3.

--Editors: Paul Tighe, Jim McDonald

To contact the reporter on this story: Frances Yoon in Seoul at fyoon2@bloomberg.net

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

Canada Dollar Falls for Second Week as Risk Appetite Slumps

Posted: 17 Dec 2010 09:30 PM PST

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By Allison Bennett and Chris Fournier

Dec. 18 (Bloomberg) -- Canada’s dollar dropped for a second week against the greenback as investors turned to the perceived safety of U.S. government debt on concern Europe’s sovereign- debt crisis will deepen.

The currency, nicknamed the loonie for the image of the bird on the C$1 coin, retreated from a one-month high as investors’ risk appetite ebbed and stocks and crude oil pared advances. The allure of U.S. assets was also burnished as Treasury yields rose to seven-month highs. Data next week may show gains slowed in Canadian consumer prices and retail sales.

“The positive equity and commodity story was winning out at the beginning of the week, but in the second half the issues in Europe and the risk aversion overwhelmed it,” said George Davis, chief technical analyst for fixed income and currency strategy at Royal Bank of Canada’s RBC Dominion Securities in Toronto. “Europe has created a bid tone for the U.S. dollar and so dollar-Canada.”

The Canadian currency weakened 0.5 percent to C$1.0140 per U.S. dollar yesterday in New York, from C$1.0091 on Dec. 10. It touched C$1.0001 on Dec. 15, the strongest level since it last traded on a one-for one basis with the greenback on Nov. 11. One Canadian dollar buys 98.62 U.S. cents.

Canadian government bonds rose, pushing the benchmark 10- year note’s yield down 12 basis points to 3.19 percent, from 3.30 percent on Dec. 10. A basis point is 0.01 percentage point. The yield touched 3.37 percent Dec. 14, the highest since June 21. The price of the 3.5 percent security due in June 2020 gained 95 cents to C$102.55.

Two-Week Low

The loonie depreciated to a two-week low yesterday, C$1.0147, as an agreement by European Union leaders at a two-day summit in Brussels failed to allay concern the debt crisis will spread from Greece and Ireland to other nations in the region.

Moody’s Investors Service downgraded Ireland’s credit rating to Baa1 yesterday from Aa2 after the government was forced to ask for external aid last month, staggered by losses in the country’s banking system. The new rating, three levels above non-investment grade, is the same one carried by countries that include Russia and Lithuania.

The EU leaders agreed to amend the bloc’s treaties to create a permanent crisis-management mechanism in 2013. Divisions flared over steps to prevent the debt crisis from engulfing Portugal and Spain.

“It’s good there is a mechanism, but on the other hand it’s in 2013 so there’s a lot of it being discounted from the market,” said C.J. Gavsie, managing director for foreign- exchange trading in Toronto at Bank of Montreal’s BMO Capital Markets.

For now, Germany ruled out topping up the current 750 billion-euro ($1 trillion) emergency fund or rushing aid to Portugal or Spain, reinforcing skepticism in markets.

U.S. Yields Surge

The greenback rose against most major counterparts this week as benchmark Treasury 10-year yields surged, touching 3.56 percent on Dec. 16, the highest level since May 13. Prices of U.S. government securities fell as the Federal Reserve said Dec. 14 the U.S. economic recovery is continuing and Congress passed an $858 billion bill extending Bush-era tax cuts for two years. President Barack Obama signed the measure into law yesterday.

Crude oil, Canada’s biggest export, trimmed an advance. January futures fell as low as $87.01 a barrel in New York yesterday after rising to $90.76 a barrel on Dec. 7, the highest level since October 2008. The Standard & Poor’s/Toronto Stock Exchange Composite Index fell 0.3 percent for the past five days, the first loss in three weeks.

Gain for Year

The Canadian dollar gained 4.4 percent over the past year in a measure of 10 developed-nation currencies, Bloomberg Correlation-Weighted Currency Indexes showed. The U.S. dollar fell 1.8 percent.

Bank of Canada Governor Mark Carney may want to consider selling Canadian dollars as an option to temper gains in the currency driven by purchases by other central banks, Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, wrote in a report yesterday.

The loonie’s strength undermines Carney’s ability to raise interest rates to slow increasing household debt levels, Shenfeld said in the report. Further gains in the currency may slow growth, he said.

“There is one weapon yet to be touched: fighting fire with fire,” Shenfeld wrote. “Canada could match foreign central- bank intervention in favor of our currency with an offsetting intervention, selling an equivalent volume of loonies.”

Consumer prices rose last month at an annual pace of 2.2 percent, compared with a 2.4 percent pace in October, according to the median forecast in a Bloomberg News survey of 17 economists before Statistics Canada released the data Dec. 21.

Retail sales rose 0.5 percent in October, after increasing 0.6 percent the previous month, according to a separate Bloomberg survey. Sales haven’t declined since May. The nation’s statistics agency will report the data on Dec. 21.

--Editors: Greg Storey, Dave Liedtka

To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net; Chris Fournier in Montreal at cfournier3@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

Canada Hires KPMG to Investigate Statistics Canada Data Leak

Posted: 17 Dec 2010 09:16 PM PST

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By Alexandre Deslongchamps

Dec. 18 (Bloomberg) -- Canada’s government hired KPMG LLP, the global accounting and professional services accounting firm, to conduct an outside investigation of the early release of economic data by Statistics Canada in a bid to protect the agency’s credibility.

KPMG will complete its investigation by March 31. Ottawa- based Statistics Canada will turn over the results of its internal probe as part of the review, according to a statement published yesterday on the agency’s website.

Industry Minister Tony Clement, who is responsible for Statistics Canada, ordered the investigation after the federal agency, Canada’s primary source of economic information, said it had allowed distributors to get information as much as “59 seconds” ahead of the official release. The agency stopped the practice on Nov. 25 after being alerted to it by Bloomberg News.

There is no evidence so far that anyone profited from Statistics Canada’s early releases, Clement told reporters Dec. 16 in Ottawa. The agency must resolve questions about the disclosures to protect its credibility, he said.

Statistics Canada said it is “committed to ensuring that the information the agency delivers is timely, relevant and made available to the public with consistency and transparency.”

The agency has a policy of providing equal access to all users. It conducted investigations last year into reports that some data may have been leaked, without finding anything wrong.

Statistics Canada has agreements with 10 distributors, including Bloomberg L.P., the parent of Bloomberg News, who are licensed to disseminate its data.

‘General Review’

In a Dec. 3 statement to Bloomberg, the agency said that following a “preliminary examination” of access logs from November it had found three distributors, including Bloomberg, had access to the data before the release time. The agency didn’t say for how long the practice had been going on and has declined to provide the names of the other two distributors, citing agency policy.

The revelations prompted opposition lawmakers, including Liberal Party Leader Michael Ignatieff, to call for a review.

In addition to a probe of the early releases, KPMG will also do a “general review” of the federal agency’s data release procedures, according to yesterday’s statement.

Used in Trading

Investors use Statistics Canada data to trade bonds, stocks and the currency, as well as to place bets on the path of monetary policy. The Canadian dollar is the world’s seventh- most-traded currency, according to an April 2010 survey by the Bank for International Settlements, with daily turnover on trades against the U.S. dollar averaging $182 billion.

The agency’s 10 paying distributors are Bloomberg, the Conference Board of Canada, EcoWin AB, Emerging Markets Economic Data Ltd., FactSet Research Systems Inc., Global Insight (Canada) Inc., Haver Analytics, Moody’s Economy.Com, Nomura Research Institute Ltd. and Thomson Financial Investment Management Group, according to Statistics Canada’s website.

Editors: Andrew Barden, Jim McDonald

To contact the reporter on this story: Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net

To contact the editor responsible for this story: Andrew Barden at barden@bloomberg.net

Picower Estate Agrees to Forfeit $7.2 Billion for Madoff Victims

Posted: 17 Dec 2010 09:03 PM PST

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By David Voreacos, Bob Van Voris and Joshua Gallu

Dec. 18 (Bloomberg) -- The estate of Jeffry Picower agreed to forfeit $7.2 billion that the investor got from Bernard L. Madoff’s Ponzi scheme, bringing the amount collected by authorities for victims of the fraud to $9.8 billion.

Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities LLC, sued Picower in May 2009, claiming he withdrew $7.2 billion more than he invested. Picower died in October 2009 at age 67. Picard and U.S. Attorney Preet Bharara, who is probing the Madoff fraud, yesterday announced the settlement with Picower’s widow, Barbara.

“I commend Barbara Picower for agreeing to turn over this truly staggering sum, which really was always other people’s money,” Bharara said at a news conference in New York. “This settlement provides a significant measure of hope to the many victims of Bernard Madoff’s horrific crimes.”

Picard said that investors in Madoff’s Ponzi scheme, the largest in U.S. history, lost $20 billion in principal. Account statements at the time of Madoff’s arrest in December 2008 showed total balances of $65 billion. Picard, who filed hundreds of lawsuits seeking $50 billion, has now recovered $9.8 billion.

Picower began investing with Madoff in the late 1970s, controlling dozens of accounts. He had a heart attack and drowned in his swimming pool in Palm Beach, Florida.

The settlement “honors what Jeffry would have wanted,” Barbara Picower said in a statement by her lawyer, William Zabel of Schulte Roth & Zabel LLP.

‘Deeply Saddened’

“I am absolutely confident that my husband Jeffry was in no way complicit in Madoff’s fraud,” she said. “The Madoff Ponzi scheme was deplorable, and I am deeply saddened by the tragic impact it continues to have on the lives of its victims. It is my hope that this settlement will ease that suffering.”

Picard, who was appointed trustee by a bankruptcy judge in Manhattan, approved 2,363 investor claims for recovery as of Dec. 10 and rejected 13,189. Reasons for rejection include that the claimants withdrew more money from their accounts than they invested. The Picower settlement, which must be approved by the bankruptcy court before it can take effect, covers all the money claimed by Picard.

“They’re getting the whole thing?” said Madoff investor Timothy Murray, 58, of Minneapolis. “Wow. That’s great. That’s wonderful. I’m beginning to think that there’s a real possibility that Picard could pay all the claims he approved and there could be extra money.”

Murray said he and his family invested $12 million over two decades and are among those rejected.

Admitted No Wrongdoing

Picower, his family and related entities, beginning in the 1970s, deposited $619.4 million with Madoff and took out $7.8 billion, according to a forfeiture complaint filed yesterday by Bharara in federal court in New York. The estate admitted no wrongdoing in settling the case.

In his will, dated 10 days before he died, Picower left $200 million in cash to his wife. He also left $25 million to his daughter, Gabrielle Picower, and about $15 million to 20 other beneficiaries. The unspecified remainder is to go to charity.

“My late husband was a talented and active investor who had extraordinary successes in business investments during his career, which will allow me to make this settlement and return to the philanthropic work that was so important to Jeffry and me,” Barbara Picower said in the statement. Bharara declined to say yesterday whether prosecutors had concluded that Picower was complicit in Madoff’s fraud.

‘Business Solution’

In the suit, Picard said Picower knew or should have known he was reaping billions of dollars from a fraud.

“Picower’s accounts were riddled with blatant and obvious fraud,” Picard said in September 2009, in legal papers opposing Picower’s attempt to have part of the claim dismissed.

In a statement yesterday, Picard said that, when he sued in 2009, “the records available led us to allege that Mr. Picower might have or should have known of Mr. Madoff’s fraud. With the benefit of additional records, I have determined that there is no basis to pursue the complaint against Mr. Picower, and we have arrived at a business solution instead.”

Zabel released a letter from Eric S. Lane, a Goldman Sachs Group Inc. managing director, that Picower was a client of the bank’s investment management division for almost three decades.

He generated investment returns of more than $2 billion “through primarily self-directed investments in public securities,” according to the letter.

“I asked for it because I felt that an important part of the story was that Jeffry Picower was a magnificent investor in his own right and didn’t need Madoff to earn billions of dollars,” Zabel said.

$4.5 Billion Account

In an interview, Zabel said Picower’s stock account at Goldman had unrealized gains of almost $4.5 billion, with almost half of it invested in Apple Inc. He declined to disclose the value of the estate.

Picower was once the chairman of Alaris Medical Systems Inc., which Cardinal Health Inc. bought in 2004 for $1.62 billion. Picower, who owned 46.6 million Alaris shares, was paid $1.04 billion in the Cardinal Health transaction. Zabel said he initially put $86 million into the company.

Barbara Picower, 67, was married to her husband for more than 40 years and lives in New York and Palm Beach, he said.

Picower’s various entities also paid almost $100 million in back taxes to the Internal Revenue Service, a process that delayed the settlement for more than a year, according to Zabel.

Hundreds of Suits

Picard has filed hundreds of suits against banks, feeder funds, investors and others alleged to have profited from Madoff’s decades-long fraud.

This month, Picard sued Bank Medici AG and its founder, Sonja Kohn, as well as Bank Austria, UniCredit SpA and dozens of other parties centered on Kohn. Picard is seeking $19.6 billion, which may be tripled to $58.8 billion under the Racketeer Influenced and Corrupt Organizations Act.

In a settlement announced Dec. 8, the family of Boston philanthropist Carl Shapiro agreed to pay back $625 million in Madoff profits. Under the agreement, the Shapiros agreed to pay $550 million to Picard for distribution to Madoff creditors. The family also agreed to pay $75 million to the Justice Department, which named Picard as special master to distribute the funds.

Picard, who will also act as a special master in the Picower settlement, said he hopes to begin distributing the money to victims in the first quarter of 2011.

The deadline for Picard to file claims expired Dec. 11, the two-year anniversary of Madoff confessing the biggest Ponzi scheme in U.S. history. Madoff is serving a 150-year prison term in a federal prison in North Carolina.

The case is Picard v. Picower, 09-1197, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--With assistance from Erik Larson in London and Robert Schmidt in Washington. Editors: Andrew Dunn, Michael Hytha.

To contact the reporters on this story: Joshua Gallu in Washington at jgallu@bloomberg.net; David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net; Bob Van Voris in New York at rvanvoris@bloomberg.net.

To contact the editors responsible for this story: David E. Rovella at drovella@bloomberg.net; Lawrence Roberts at lroberts13@bloomberg.net.

Ex-Dell Worker Says He Leaked Information to Guidepoint Clients

Posted: 17 Dec 2010 09:03 PM PST

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By David Glovin and David Voreacos

Dec. 18 (Bloomberg) -- When Former Dell Inc. Global Supply Manager Daniel Devore pleaded guilty last week to insider- trading charges, he admitted to leaking inside information to clients of consulting and research firm Guidepoint Global LLC.

DeVore made the confession as part of his Dec. 10 guilty plea to conspiracy and wire fraud charges in Manhattan federal court. He also said he leaked tips to clients of Primary Global Research, another research firm. DeVore is cooperating with prosecutors in their probe of insider trading on Wall Street.

“I also provided material non-public information to clients of Guidepoint and Vista,” he told U.S. District Judge Jed Rakoff, according to the transcript of his plea.

Guidepoint, a so-called expert-networking firm, acquired Vista Research Inc. from Standard & Poor’s on May 21, 2009, according to a statement on Guidepoint’s website. Calls for comment to a spokesman for New York-based Guidepoint weren’t immediately returned.

Federal prosecutors on Dec. 16 arrested a Primary Global sales manager, James Fleishman, and three employees of technology companies who also worked as consultants for the Mountain View, California-based firm in a widening crackdown on insider trading. Prosecutors also announced Devore’s guilty plea, a transcript of which was made public Dec. 16.

The insider trading investigation became public last year and has led to 15 guilty pleas and more than two dozen arrests, including that of Raj Rajaratnam, co-founder of the Galleon Group LLC hedge fund. Rajaratnam denies wrongdoing. Another Primary Global employee, Don Ching Trang Chu, was arrested last month.

Passed Tips

Guidepoint is “an exclusive network of academic and industry professionals who consult to business decision-makers and leading investors around the world,” according to its website.

Its advisors include executives, managers, doctors, engineers, attorneys and consultants who “provide clients insight into the latest developments in their industries.”

Guidepoint was started in 2003 as Clinical Advisors, and changed its name in 2007 as it broadened its network of experts beyond those in the healthcare and medical industries. In 2009, after acquiring Vista, its base of experts grew to more than 130,000, according to its website.

On Nov. 30, Massachusetts Secretary of the Commonwealth William F. Galvin subpoenaed Guidepoint in connection with its relationship with a hedge fund in Massachusetts.

‘Bribing You?’

Gerson Lehrman Group in New York is the largest expert network in the U.S, according to its website.

In his guilty plea, DeVore said he worked as a consultant for Primary Global, Guidepoint and Vista from late 2007 until August 2010. He said he passed information about Dell’s product numbers, pricing inventory and market share to Primary Global clients including money managers and hedge funds, many of whom were based in New York.

Rakoff asked Devore whether he “lined” his pocket by selling insider information to outsides.

“Through the arrangement of PGR, yes,” DeVore replied.

Rakoff asked DeVore whether Primary Global was “bribing you” to disclose inside information. DeVore, who was paid a total of about $145,000 by the firm, said yes.

Suppliers

“I was violating nondisclosure agreements that Dell had with its suppliers,” including Seagate Technology PLC and Western Digital Corp., he said.

As part of DeVore’s cooperation agreement with prosecutors, he promised to disclose details of his “securities fraud” while working at Primary Global, Guidepoint and Vista, according to court papers.

At the hearing, Assistant U.S. Attorney Antonia Apps asked Rakoff to postpone DeVore’s sentencing for three years, “owing to the large nature of this investigation.” The judge, while expressing surprise that the investigation would take so long, agreed to the request.

Guidepoint’s compliance page bars consultants from disclosing confidential information. “An Advisor’s membership and participation may not result in the disclosure of any confidential or proprietary information (including trade secrets) not owned exclusively by the Advisor,” it says.

Mimi Barker, a spokeswoman for McGraw-Hill Cos.’ Standard & Poor’s, the world’s leading index provider, didn’t have an immediate comment.

The case is U.S. v. DeVore, 10-cr-1248, U.S. District Court, Southern District of New York (Manhattan).

--With assistance from Sree Bhaktavatsalam in New York. Editors: Mary Romano, Fred Strasser

To contact the reporters on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net and; David Glovin in New York at dglovin@bloomberg.net.

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