2008年12月31日 星期三

Downgrades And Downfall (AIG )

THE CRASH | What Went Wrong

Downgrades And Downfall

How could a single unit of AIG cause the giant company's near-ruin and become a fulcrum of the global financial crisis? By straying from its own rules for managing risk and then failing to anticipate the consequences.

Washington Post Staff Writers
Wednesday, December 31, 2008; Page A01

Third of three parts

The contracts were flying out of AIG Financial Products. Hardly anyone outside Wall Street had ever heard of credit-default swaps, but by early 2005, investment banks were snapping them up to insure all kinds of deals in case of default, fueling one of the great financial booms in U.S. history.

This Story

During twice-monthly conference calls that originated from the company's headquarters in Wilton, Conn., president Joseph Cassano would listen as marketing executive Alan Frost listed the latest swap transactions for associates in the firm's offices in London, Paris and Tokyo.

Once a small part of the firm's business, the increasingly popular contracts had helped boost the company's profits to record levels. The company's computer models continued to show only a minute chance that the firm would ever pay out a dime on the contracts, and it turned down deals that didn't meet its standards. After their reviews, Cassano and his team would consult with AIG executives, sometimes including chairman and chief executive Maurice "Hank" Greenberg. "We rode pretty tight rein on them," Greenberg recalls.

But the swaps also exposed Financial Products and its parent AIG, the global insurance titan, to billions of dollars in possible losses. By spring 2005, some Financial Products executives were questioning the surge in volume. Among them was Cassano, an early advocate for the swaps business who ran the firm from its London office.

"How could we possibly be doing so many deals?" one executive recalls Cassano asking Frost, the firm's liaison with Wall Street dealers, during one conference call.

"Dealers know we can close and close quickly," Frost said. "That's why we're the go-to."

Efficiency wasn't the only reason. Frost didn't have to say aloud what everyone at the firm already appreciated. Financial Products had become the "go-to" for credit-default swaps in part because of its knowledge and reliability, but also because it had AIG's backing. The parent company's top-drawer, Triple A credit rating and its deep pockets assured customers that they could rest easy.

Their comfort turned out to be illusory. The credit-default swaps became a primary force in the disintegration of AIG as a private enterprise and a massive government rescue aimed at preventing catastrophic damage to the world's financial system. Never in U.S. history has the government invested so much money trying to save a private company.

Even as Frost spoke, trouble was brewing for AIG. On March 14, 2005, Greenberg stepped down amid allegations about his involvement in a questionable deal and accounting practices at AIG. The next day, the Fitch Ratings service downgraded AIG's credit rating to AA. The two other major rating services, Moody's and Standard & Poor's, soon followed suit.

The initial fallout came swiftly, as AIG's annual report to federal regulators disclosed. The downgrades had triggered provisions in Financial Products' existing transaction, the report said, requiring its parent company to post $1.16 billion in collateral for the deals.

The company also warned that the downgrades could erode confidence in Financial Products, a crucial element in the unit's phenomenal success. "Historically, AIG's triple-A ratings provided AIGFP a competitive advantage. The downgrades will reduce this advantage and [some] counterparties may be unwilling to transact business with AIGFP except on a secured basis," AIG reported to the Securities and Exchange Commission in May 2005.

The swaps business had bound Financial Products to hundreds of counterparties in New York and Europe. Wall Street firms such as Goldman Sachs and Merrill Lynch favored the credit-default swaps as an extra layer of protection for mortgage-backed securities, one of the many investment by-products helping to fuel the overheated housing boom. European banks liked them because they could treat the swaps as a form of collateral, which freed up cash that the banks would ordinarily have to set aside as protection against losses.

This Story

The interlocking, complex nature of these contracts would speed their downfall. When the housing market began to unravel in 2007, it set off a chain of events that would prove disastrous: downgrades in the ratings of securities that Financial Products had insured; demands by Financial Products' counterparties for billions of dollars in collateral; AIG's desperate search for cash to meet the collateral calls; a panicky weekend of negotiations in New York and Washington; and, finally, Treasury Secretary Henry M. Paulson's conclusion that AIG could not be allowed to collapse.

The taxpayer rescue of AIG stands at $152 billion, including $60 billion in loans, a $40 billion investment in AIG preferred stock and a $52 billion purchase of troubled AIG assets that the government hopes to sell off to recoup its investment.

Meanwhile, federal investigators are examining statements made last year by the company and its executives to determine whether shareholders received misleading information. Several investors have filed civil lawsuits, alleging that executives at AIG and Financial Products hid the extent of their credit-default swap troubles.

Whether that turns out to be the case, there's no doubt that Cassano's concern in spring 2005 did not slow the firm's mounting involvement in the credit-default swap business for several months. The deals mounted and the risks grew.

Even after Financial Products stopped writing the credit-default swaps at the end of 2005, it maintained a public veneer of confidence that the contracts it had on its books were fine and that their computer models were sound. As Cassano told investors in a December 2007 webcast, "Our fundamental analysis says this is a money-good asset. We would not be doing the shareholders any benefit by exiting this right now and taking that loss."

2: Playing Catch-Up

By 2005, the world of debt had changed dramatically since Financial Products wrote its first credit-default swap in 1998. Back then, the swaps involved corporate debt, essentially the bonds that corporations use to finance their operations. There was a wealth of historical data about corporate debt, which gave Financial Products' executives a high degree of confidence in consultant Gary Gorton's computer models.

Gorton, a Yale business professor with a PhD in economics, had written scores of intricate papers about corporate finance, banking and the history of financial panics. Cassano saw Gorton as a valuable asset. "Gary has helped us tremendously in helping us organize our procedures, organize our modeling effort, developing the intuition," Cassano said during the December 2007 webcast for investors.

By then, Gorton had worked as a consultant for Financial Products for nearly a decade. At that same investor conference, Gorton explained how he saw the analysis that he and his colleagues had been doing. "These models are guided by a few very basic principles, which are designed to make them very robust and to introduce as little model risk as possible," he said. "No transaction is approved by Joe if it's not based on a model that we built."

Financial Products had built itself on data, analysis and a culture of healthy skepticism. Even as the firm grew to about 400 in 2005 from 13 employees in 1987, it sought to maintain its discipline. At Financial Products, God had always been in the details, and the details were always rooted in the math.

Over the years, the firm had stayed ahead of competitors by finding innovative ways to manage and minimize the risks it took on for clients. Financial Products executives made fortunes, some taking home tens of millions of dollars a year, as the firm created markets in untapped areas -- such as buying synthetic coal equipment to capitalize on energy tax breaks.

On credit-default swaps, the firm adapted as the market evolved. By 2004, Wall Street investment banks were discovering how to turn consumer debt into a moneymaker, churning out bond-like securities backed by mortgages and other assets. Credit-default swaps helped attract institutional investors to these mind-bendingly complex deals, known in Wall Street jargon as collateralized debt obligations, or CDOs.

CDOs defined a revolution in corporate finance called "securitization." Wall Street saw any income stream as a candidate for securitizing: mortgages, credit card payments, car loans, even student loans. The investment banks would bundle these loans, and the monthly payments that came with them, into a new security for investors looking for steady but higher yields than Treasurys or corporate bonds.

CDOs had been around for years, but the real estate boom suddenly made mortgages one of the hottest investments on Wall Street. The mortgage industry turned into the equivalent of a giant assembly line, lubricated by fees from one end to the other. New lenders sprung up by the month, offering loans to first-time buyers as well as existing homeowners who wanted to move up to more square footage. For people with shaky credit, the industry provided subprime loans, with higher rates that some homebuyers now cannot repay.

Banks packaged and resold the mortgages in pools, which became the basis for mortgage-backed securities. Wall Street scooped them up. The CDO market took off, ballooning to $551 billion issued in 2006 from $157 billion in 2004.

The CDO structure depended on the concept of layered risk. The securities in the "super senior" top tier were considered low risk and attracted the highest ratings. In return for their safety, these bonds paid the lowest interest rate. The reverse was true at the other end: The lower tiers absorbed the first losses in the case of loan defaults. For accepting extra risk, investors in these tiers earned a higher interest rate.

Financial Products made its money by selling credit-default swaps only on the super-senior tier. It seemed a safe bet: Cassano once defined super senior as the portion of the deal that was safe even "under worst-case stresses and worst-case stress" assumptions.

The mortgage-backed CDOs were also thought to be safe because of the geographic diversity of the underlying loans. Surely, investment bankers reasoned, people in different parts of the country would not default on their home loans at the same time. The real estate market was strong and showed no sign of faltering.

Financial Products executives said the swaps contracts were like catastrophe insurance for events that would never happen.

Hedging, the firm's hallmark, seemed largely unnecessary. "Given the conservatism in that we've built these portfolios, we haven't had to do a huge amount of hedging over the years," Andy Forster, the firm's global head of credit trading, said at a May 2007 presentation to investors in New York.

Cassano also emphasized that both Financial Products and AIG had a review role. "Each and every one of our transactions," he told investors listening to the December 2007 webcast, "passes through the same careful process. We don't have any short-cuts. . . . So there's always two eyes, two teams reviewing our business. There is not one dollar of this business that's been done that hasn't gone through that double-review check."

But there were provisions in the swap contracts that the computer simulations hadn't adequately addressed, as later events showed. There were also tremors in the mortgage industry that would convince one Financial Products executive that the company should get out of the credit-default swap business -- fast.

3: The Subprime Threat

In fall 2005, Eugene Park was asked to take over Alan Frost's responsibilities at Financial Products. Frost had done exceedingly well in marketing the credit-default swaps to Wall Street, and was getting a promotion. He would now report to Cassano directly on other strategic projects.

Park had been at the firm for six years and ran the North American corporate credit derivative portfolio. Taking on that swaps business would boost his already handsome compensation.

But he wanted no part of it. He was worried about the subprime component of the CDO market. He had examined the annual report of a company involved in the subprime business. He was stunned, he told his colleagues at the time.

The subprime loans underlying many CDOs formed too large a part of the packaged debt, increasing the risk to unacceptable levels. Those loans could default at any time, anywhere across the country because the underwriting processes had been so shoddy. The diversification was a myth -- if the housing market went bust, the subprimes would collapse, like a house of cards.

Park spelled out his reasoning in meetings and conversations with colleagues over the next several weeks. It was as if he had scratched the needle across an old record album at full volume.

Cassano agreed the firm should dig deeper. Over the next few weeks, Financial Products executives worked with researchers from investment banks to examine the subprime threat.

The subprime loans underlying many CDOs formed too large a part of the packaged debt, increasing the risk to unacceptable levels. Those loans could default at any time, anywhere across the country because the underwriting processes had been so shoddy. The diversification was a myth -- if the housing market went bust, the subprimes would collapse, like a house of cards.

Park spelled out his reasoning in meetings and conversations with colleagues over the next several weeks. It was as if he had scratched the needle across an old record album at full volume.

Cassano agreed the firm should dig deeper. Over the next few weeks, Financial Products executives worked with researchers from investment banks to examine the subprime threat.

As a company with billions of dollars riding on arcane financial transactions such as derivatives, Financial Products certainly faced challenges, Cassano said. He then alluded to the debate within the firm over credit-default swaps.

"Credit risk is the biggest risk our group has. It's the single biggest risk that we manage," he said. "But with a AA plus/AA credit portfolio, there's not a lot of risk sitting in there. And so while it is the largest risk, it's not by any stretch a risky business."

Three months later, in a conference call with investors, AIG chief executive Martin Sullivan struck a different note, acknowledging the growing unrest over defaults in the U.S. mortgage market.

The 52-year-old Sullivan had taken the reins at AIG after Greenberg's ouster in March 2005. He was an AIG veteran, with more than 35 years at the company, primarily on the insurance side. His rise to the top was an exclamation point on a career that began at 17, when he joined AIG's London office as a clerk.

Cassano joined Sullivan on the call. Asked by a Goldman Sachs analyst about the stability of Financial Products' huge portfolio of credit derivatives, Cassano responded with calm and confidence.

"It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing $1 in any of those transactions," Cassano said.

Sullivan added: "That's why I am sleeping a little bit easier at night."

5: Collateral Calls

After Sullivan's comment to investors, a wave of collateral calls would begin, swamping AIG.

The first came from Goldman Sachs, the venerable Wall Street investment bank and one of Financial Products' biggest counterparties. Citing the plummeting value of some subprime assets underlying securities that Financial Products had insured, Goldman demanded $1.5 billion to help cover its exposure.

The 2005 downgrade of AIG to a AA company now came into play. Under the swaps contracts, AIG had to post more collateral than in its Triple A days.

AIG disputed the amount but had no choice but to negotiate. It agreed to post $450 million.

As if AIG didn't have enough problems, the rapidly crumbling real estate market was causing the ratings services to downgrade the securities in CDOs, including the top layers that investors had been led to believe were safe. Those downgrades also made AIG more vulnerable under the swaps contracts.

In October, Goldman came calling again, demanding $3 billion. AIG balked once more, but agreed to provide another $1.5 billion.

These and other events sent AIG's stock price tumbling. In six weeks, between early October and mid-November, it fell more than 25 percent, contributing to the perception that AIG was in trouble.

The collateral calls also set off alarms at PricewaterhouseCoopers, AIG's outside auditing firm. The auditors told Sullivan on Nov. 29 that they had found serious oversight problems and "that AIG could have a material weakness" relating to risk management. More ominously, they said, no one knew whether the value that Financial Products placed on its portfolio of derivatives was accurate. That meant the losses in market value could be much worse.

About the same time, the SEC required companies like AIG to adopt an accounting standard known as "mark-to-market," designed to give investors a better sense of the current values of a company's assets. As the housing market declined, and the rate of defaults increased, the swaps looked at greater risk. That allowed counterparties to ask for more collateral.

Greenberg questioned the merits of the rule. "Mark-to-market accounting, I would argue, probably caused a great deal of the trauma that the financial industry is in today," he said.

On paper, the value of the credit-default swaps was sliding. In November, the company reported the portfolio had lost $352 million. At the December 2007 webcast for investors, Cassano reported a higher number, $1.1 billion.

Sullivan, Cassano and others at the company remained bullish on their ability to weather the calls, and in the long run, even recover the collateral they had posted. "But because this business is carefully underwritten," Sullivan said, "we believe the probability that it will sustain an economic loss is close to zero."

AIG's chief risk management officer, Robert E. Lewis, reminded investors of the company's culture. "If you look at AIG's history," Lewis said, "I think you can realize that AIG in its culture does not have an appetite for undue concentrations of risk."

Cassano made the case that Financial Products would survive the storm because it had one of the world's best companies behind it.

"Clearly this is a time where it's a huge benefit to be part of the AIG family," he told the investors. "It's these crises and these points in time that give us the wherewithal right now to stand here with you and say on the back of giants, on the back of everybody at AIG who has built the capital that AIG has, the AIGFP unit is able to withstand this aberrant period."

Federal investigators are examining the December 2007 webcast as part of their effort to determine whether Cassano, Sullivan and others at the company misled investors about how dire the situation had become.

Two months later, on Feb. 11, AIG disclosed that its auditors had found the company "had a material weakness in its internal control over financial reporting and oversight relating to the fair value valuation of the AIGFP super-senior credit-default swap portfolio." On Feb. 28, AIG announced that its estimate of paper losses had spiraled to $11.5 billion. The company also acknowledged that its collateral postings had reached $5.3 billion.

The next day, Sullivan announced that the Cassano era was over. The Financial Products president had resigned, effective March 31. Sullivan did not reveal that Cassano would get $1 million a month as a consultant. That fact came out months later during congressional hearings on AIG's near-collapse. AIG had also provided a record of Cassano's compensation history to the committee, showing that he received $43.6 million in salary and bonuses in 2006, and $24.2 million in 2007.

"Joe has been a very valuable member of the AIGFP senior management team for over 20 years," Sullivan said in making the announcement. "He has had a great career with us, and we wish him the very best in the future."

The worst was still to come.

6: A Deep Hole

The urgent phone call that alerted Eric Dinallo to the extent of the financial meltdown came Friday, Sept. 12, as he drove to his family's weekend home in the Hudson Valley, north of Manhattan.

Dinallo, head of New York state's insurance department, got a briefing about AIG, where panicked executives were desperately trying to come up with a huge infusion of cash. They had heard the bond-rating agencies were going to downgrade the company's already ailing credit grade, which would trigger more collateral calls. "And if downgraded -- even like one notch -- they didn't have sufficient liquidity" to meet the calls, Dinallo said recently.

Dinallo recognized the danger. AIG had operated for so long at the center of the world's financial web, with so many counterparties, that its collapse would be felt in every corner of the globe. As insurance superintendent, Dinallo was aware of the previous calls. But he was still taken by surprise. "I never realized things were as bad as they were," he said. "I didn't realize how deep the hole was they had created."

AIG was going to try selling some of its life insurance affiliates. AIG officials also made a pitch for a $20 billion loan from the state insurance department. "They said, 'We will pay this loan quickly,' " Dinallo recalled.

Dinallo cut short his weekend plans and headed back to Manhattan early Saturday. By noon he had assembled a small team at AIG headquarters. Working on the 18th floor, not far from where Greenberg once reigned, Dinallo and his crew pored through AIG's books, looking for ways to raise money.

Meanwhile, Goldman Sachs and J.P. Morgan set to work on a $75 billion bridge loan from a syndicate of major financial institutions, which was intended to give AIG cash until it could sell enough assets to bail itself out.

The urgency and tension were palpable. New York's governor, David A. Paterson, called in. So did Timothy Geithner, head of the New York Federal Reserve. Geithner was swamped that day with the imminent collapse of Lehman Brothers, but he wanted constant updates.

By Sunday night, no solution emerged, and AIG executives were worried that the company's stock price would take another hit when the market opened on Monday.

On Monday morning, Paterson announced he would relax insurance regulations so that AIG could borrow up to $20 billion from its subsidiaries to cover operating expenses. Meanwhile, the Goldman-J.P. Morgan effort on the bridge loan wasn't coming together.

Hour by hour, it became clear that AIG was far more exposed by Financial Products' commitments than anyone realized. The next day, sensing disaster, the Federal Reserve Board, with the backing of the Treasury Department, stepped in and took control of what had been one of the most successful private enterprises ever.

"The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance," the Federal Reserve said.

7: 'An Unacceptable Situation'

In October, SEC chairman Christopher Cox appeared at a roundtable discussion that the agency was hosting at its Washington headquarters. He delivered a tough, grim message: The federal government had failed taxpayers by not regulating the swaps market.

"The regulatory black hole for credit-default swaps is one of the most significant issues we are confronting in the current credit crisis," Cox said, "and it requires immediate legislative action."

He tried to put the regulatory failure into context. "The market for CDS is barely 10 years old. It has doubled in size since just two years ago," he said. "It has grown between the gaps and seams of the current regulatory system, where neither the commission nor any other government agency can reach it. No one has regulatory authority over credit-default swaps -- not even to require basic reporting or disclosure."

He went on: "The over-the-counter credit-default swaps market has drawn the world's major financial institutions and others into a tangled web of interconnections where the failure of any one institution might jeopardize the entire financial system. This is an unacceptable situation for a free-market economy."

8: Recriminations

The question of what went wrong at AIG and its Financial Products unit provoked some finger-pointing in recent interviews with former executives.

Greenberg, the ousted AIG chairman, says that the responsibility rests with the people who ran the company after his forced resignation in 2005. He said that Cassano, the man he appointed to run Financial Products in 2001, never would have been allowed to do anything untoward under his leadership. "No. No," Greenberg said. "Because he was controlled."

His longtime deputy, former AIG vice chairman Edward Matthews, also blamed their successors. "When Hank and I left," he said, "those chains that bound Joe Cassano were off."

Cassano doesn't agree. Through his lawyer, F. Joseph Warin, he maintained that "every single super-senior CDS investment was authorized by AIG corporate."

Warin said, in a statement: "Regardless of what Mr. Greenberg says today, the facts speak for themselves: Mr. Cassano decided on his own, after Mr. Greenberg left AIG, to stop writing CDS [credit-default swap] protection. Mr. Cassano instructed his team to analyze the mortgage underwriting standards and then made the decision to exit the business in late 2005, all within months of Mr. Greenberg leaving the company."

As for the allegations that Cassano and others made misleading statements in December 2007, Warin has said, in a statement, his client acted lawfully and is cooperating with investigators. "He provided full and complete information to investors, his supervisors and auditors," Warin said.

Howard Sosin and Randy Rackson, two of Financial Products' founders, left the company in 1993 after a bitter dispute with Greenberg. Sosin lives in Connecticut, not far from Financial Products' headquarters. He traces the roots of the firm's demise to Greenberg's decision to force him out.

"We did really well with it. AIG did really well with it," Sosin said, adding that recent events could have been avoided with more attention to the firm's "core values." "It did not have to be this total failure of control."

In his brownstone on Manhattan's Upper West Side, Rackson said, "You put something together that was good, and then somebody takes the controls and drives it into the ground."

9: Epilogue

On Nov. 11, Gerry Pasciucco pulled open the front door of AIG Financial Products headquarters in Wilton, Conn. For much of Pasciucco's career on Wall Street, Financial Products had drawn some of the smartest, most ambitious people in the business, while doing pioneering work.

Now, it was in ruins.

Just weeks before, the 48-year-old Pasciucco, a vice chairman at Morgan Stanley, had heard from colleagues working with federal authorities that AIG was looking for someone to end Financial Products. He spoke with current AIG chief executive, Edward Liddy, who invited him to the Manhattan headquarters of the hemorrhaging insurance giant. Sullivan was gone; he had resigned as of July 1 with a $47 million severance package.

As Liddy and Pasciucco sat in the office once occupied by Greenberg, Liddy spelled out what he needed from Pasciucco: To identify Financial Products' outstanding obligations, resolve those transactions as profitably and quickly as possible, and then close the doors and turn out the lights.

Pasciucco had worked at Morgan Stanley for 24 years in capital markets and risk assessment. He had once been filmed by Harvard Business School for a case study on how to manage in a fast-paced financial market. But even with that background, he wondered whether he had the chops to sort out Financial Products' problems.

"How solvable is it?" Pasciucco recalled asking Liddy. "I'm up for a challenge, but there has to be a chance."

Liddy told Pasciucco to think about it. Back in his Morgan Stanley office, overlooking Times Square, Pasciucco did more homework. The organization was in desperate need of leadership and a game plan for unwinding its enormous book of transactions. Pasciucco came to believe that he could make a difference and decided to take the job, in part because he saw it as a chance to pitch in on the great economic crisis of his time.

Now, in Wilton for his first day on the job, Pasciucco knew from the demeanor of new colleagues that it was going to be even rougher than he thought. Their faces looked glum, their arms were crossed, and they seemed unsure of what to do.

He dove into the company's books. The story he found in the numbers was fascinating and daunting: Financial Products had $2.7 trillion worth of swap contracts and positions; 50,000 outstanding trades; 2,000 firms involved on the other side of those trades; and 450 employees in six offices around the world. The majority of the firm's trades had been hedged, essentially along the lines that Sosin, Rackson and others had laid out two decades before.

"The place made sense when I got here," Pasciucco said last week. "They were very, very smart."

But Pasciucco soon found evidence of a fatal miscalculation. It seems that as Financial Products ramped up its credit-default swap business, its leaders assumed that its parent, AIG, would always be as strong as it was the day it backed the firm's first big trade in 1987. He said they had failed to prepare for the possibility of a downgrade in AIG's credit rating.

The executives who had pushed or approved the credit-default swap business had placed too much faith in the math that told them the worst would never happen, that AIG and its deep pockets would be there to usher them through the trouble.

"When the unexpected happens and you have the biggest credit crisis since 1929, you have to be prepared to deal with it, and they weren't," Pasciucco said. "There was no system in place to account for the fact that the company might not be a Triple A forever."

2008年12月25日 星期四

Royal Philips Sheds Old Businesses for New Directions

Royal Philips Sheds Old Businesses for New Directions

Published: December 25, 2008

BOSTON — Royal Philips Electronics, the Dutch industrial giant, is convinced of two things: the population is getting older and it is getting greener.

Those two trends are guiding the company as it continues to transform itself, reorganizing its divisions and jettisoning product lines while picking up others.

Long known in this country — when it’s not confused with the company that makes Phillips Milk of Magnesia — as a manufacturer of Magnavox televisions, Norelco shavers and Philips incandescent light bulbs, Royal Philips wants to get away from home electronics and instead sell hospital scanning and monitoring equipment and high-tech light bulbs made with light-emitting diodes.

“We were a technology-driven company,” said Gerard J. Kleisterlee, the chief executive of Philips. “But that is only one element. Now we are focusing on care cycles. ‘Health and well-being’ is a common theme that everyone works on.”

The company’s chief financial officer, Pierre-Jean Sivignon, put it another way: “An uptick in world aging and chronic diseases will drive our business.”

Getting rid of divisions and rehabilitating others is nothing new to Philips. The company has shrunk, in terms of annual gross sales, by 30 percent over the last seven years, to 26.8 billion euros, or about $37.5 billion.

It continues to sell businesses. In 2006, it sold 80.1 percent of its semiconductor business. It reduced its share in LGPhilips LCD, a joint venture with LG Electronics of South Korea to make TV displays.

Philips never made any headway in the low-margin, increasingly commoditized television business. It announced last April that it would cast off its American and Canadian TV operations and license the Philips brand to Funai in exchange for a royalty on sets sold. It has also ended TV sales in Australia and New Zealand.

It did not do much better with other home entertainment products. On Jan. 1, it will discontinue selling DVD, Blu-ray and home theater surround-sound devices in the American market. Funai, a Japanese company, will make and market the products with the Philips name. The company will continue to sell TVs in some markets, and it will also keep selling MP3 players, shavers, toothbrushes, baby care products, home appliances and portable music accessories. Only two years ago, half its revenue came from consumer electronics, but now it is less than 43 percent.

“I could see the day when they get out of TV in Europe,” said Simon Smith, director and equity analyst at Credit Suisse in London. Mr. Smith noted that in this low-margin business, Philips “innovates around the edges,” to maintain profits.

Yet even though the world is simultaneously aging and becoming more environmentally conscious, the sudden economic downturn could change Philips’s short-term fortunes. Last month, Philips said it would lay off 1,600 health care division employees, 5 percent of its work force, because of the recession. And it is unlikely that an LED light bulb that costs more than $50 will find many eager buyers as companies and households cut back.

Mr. Kleisterlee wants to get Philips back to the size it was in 2000. “In five years, I want to grow Philips to a 30 billion euro ($37.9 billion) business,” he said.

To get there, Philips has gone on a buying spree. In the last two years it has picked up 16 companies, 11 of them in the United States, including some that specialize in health care and lighting.

Philips bought Lifeline, a home health care monitoring system, and Respironics, which makes equipment to treat sleep apnea and other sleep disorders. The division already specializes in medical imaging, competing against General Electric and Siemens in advanced CT, MRI and X-ray machines, and claims a 40 percent global market share (50 percent in the United States) for in-patient monitoring, including ultrasound and other pregnancy-monitoring equipment.

Philips also sells cardiac home monitors that transmit data to a doctor’s office, home defibrillators and a variety of out-patient monitoring systems for assisted living operations.

Its new Lifeline division extends the reach beyond the hospital by monitoring 720,000 elderly or infirm at-home customers in the United States and Canada. It is also working with an intriguing business model. “I don’t want to sell blood pressure cuffs and defibrillators,” said Ronald Feinstein, Philips Lifeline’s president. “I want to give them away and charge a monthly fee.”

Customers, who pay $35 to $45 a month, are given a pendant or a TV set-top box that connects to Lifeline. If they experience a medical problem, they push a button on the device to summon help.

The company loses about 35 percent of its subscribers each year, mostly because of death. Nevertheless, the subscriber base has been growing about 10 percent a year. The company says it has 60 percent of the home-monitoring market in the United States.

The final addition to the revenue stream: the 250 installers who show the subscribers how to use the devices also sell them other products, like fall detectors and automatic pill dispensers.

The second part of its shopping spree secured Philips a leading position in the market for the next generation of light bulbs that may eventually replace compact fluorescent bulbs. It bought Color Kinetics, a developer of advanced LED lighting products, and Genlyte, a lighting fixtures maker best known for its Lightolier brand.

Lighting is also expected to make important gains in emerging markets as consumers there gain more income. “One of the very first things people buy in emerging markets is light,” Mr. Sivignon said.

Most of the lighting will use LEDs, or what the industry calls solid-state lighting. Philips is spending heavily on the technology. The bulk of its research and development budget, about 5.2 percent of global lighting revenue, is used for LED research.

Philips expects that in two years, 20 percent of its lighting sales for commercial use will come from LEDs. The company is using demonstration projects to promote its vision of lighting’s future. The London Eye ferris wheel has been retrofitted with Philips LED products. Dean Kamen, inventor of the Segway, plans to use Philips LED lights exclusively on an island he owns near Connecticut to cut his power consumption. Philips has also bid on a project to light the Empire State Building.

LED bulbs typically use one-tenth the power of traditional light bulbs and last up to 20 times as long. But their prices remain high — a LED that could replace a $1 incandescent light bulb or a $2 compact fluorescent bulb now costs about $60. So until volumes go up and prices fall, the bulbs will mostly be used in commercial settings, not residential.

Mr. Kleisterlee said, “Without it, we would have had a dying business. The world wants more lighting and more efficient lighting.”

2008年12月23日 星期二

A Race to the Bottom

Op-Ed Columnist

A Race to the Bottom

Published: December 22, 2008

Toward the end of an important speech in Washington last month, the president of the American Federation of Teachers, Randi Weingarten, said to her audience:

Readers' Comments

Share your thoughts.

“Think of a teacher who is staying up past midnight to prepare her lesson plan... Think of a teacher who is paying for equipment out of his own pocket so his students can conduct science experiments that they otherwise couldn’t do... Think of a teacher who takes her students to a ‘We, the People’ debating competition over the weekend, instead of spending time with her own family.”

Ms. Weingarten was raising a cry against the demonizing of teachers and the widespread, uninformed tendency to cast wholesale blame on teachers for the myriad problems with American public schools. It reminded me of the way autoworkers have been vilified and blamed by so many for the problems plaguing the Big Three automakers.

But Ms. Weingarten’s defense of her members was not the most important part of the speech. The key point was her assertion that with schools in trouble and the economy in a state of near-collapse, she was willing to consider reforms that until now have been anathema to the union, including the way in which tenure is awarded, the manner in which teachers are assigned and merit pay.

It’s time we refocused our lens on American workers and tried to see them in a fairer, more appreciative light.

Working men and women are not getting the credit they deserve for the jobs they do without squawking every day, for the hardships they are enduring in this downturn and for the collective effort they are willing to make to get through the worst economic crisis in the U.S. in decades.

In testimony before the U.S. Senate this month, the president of the United Auto Workers, Ron Gettelfinger, listed some of the sacrifices his members have already made to try and keep the American auto industry viable.

Last year, before the economy went into free fall and before any talk of a government rescue, the autoworkers agreed to a 50 percent cut in wages for new workers at the Big Three, reducing starting pay to a little more than $14 an hour.

That is a development that the society should mourn. The U.A.W. had traditionally been a union through which workers could march into the middle class. Now the march is in the other direction.

Mr. Gettelfinger noted that his members “have not received any base wage increase since 2005 at G.M. and Ford, and since 2006 at Chrysler.”

Some 150,000 jobs at General Motors, Ford and Chrysler have vanished outright through downsizing over the past five years. And like the members of Ms. Weingarten’s union (and other workers across the country, whether unionized or not), the autoworkers are prepared to make further sacrifices as required, as long as they are reasonably fair and part of a shared effort with other sectors of the society.

We need some perspective here. It is becoming an article of faith in the discussions over an auto industry rescue, that unionized autoworkers should be taken off of their high horses and shoved into a deal in which they would not make significantly more in wages and benefits than comparable workers at Japanese carmakers like Toyota.

That’s fine if it’s agreed to by the autoworkers themselves in the context of an industry bailout at a time when the country is in the midst of a financial emergency. But it stinks to high heaven as something we should be aspiring to.

The economic downturn, however severe, should not be used as an excuse to send American workers on a race to the bottom, where previously middle-class occupations take a sweatshop’s approach to pay and benefits.

The U.A.W. has been criticized because its retired workers have had generous pensions and health coverage. There’s a horror! I suppose it would have been better if, after 30 or 35 years on the assembly line, those retirees had been considerate enough to die prematurely in poverty, unable to pay for the medical services that could have saved them.

Randi Weingarten and Ron Gettelfinger know the country is going through a terrible period. Their workers, like most Americans, are already getting clobbered and worse is to come.

But there is no downturn so treacherous that it is worth sacrificing the long-term interests — or, equally important — the dignity of their members.

Teachers and autoworkers are two very different cornerstones of American society, but they are cornerstones nonetheless. Our attitudes toward them are a reflection of our attitudes toward working people in general. If we see teachers and autoworkers as our enemies, we are in serious need of an attitude adjustment.

2008年12月21日 星期日


注意 這些都是多國籍企業的本國人

惠普新法寶 退休員工幫忙打口碑

2008.12.22 02:54 am





惠普說,網路時代興起新一波草根行銷,退休員工正好可提供口碑與客觀保證,是其他新興科技公司沒有的資產。惠普行銷長曼德侯(Michael Mendenhall)說:「我們打算重用這些偉大的品牌尖兵。說到口碑與第三人的客觀背書,什麼人會比得上自己(過去的)員工呢?」



除了惠普,IBM、洛克希德馬丁(Lockheed Martin),甚至歷史相對較短的英特爾公司都擁有忠心耿耿的退休員工團體。

矽谷地區退休員工形成緊密的網路,包括出身非營利機構SRI International與全錄研究中心的老人,他們曾親身經歷矽谷的崛起,對傳統有特殊的感情,他們曾共同參與一些特定計畫或技術標準的建立,而產生深厚的認同感。

Bagged: Chanel’s Mobile Art Pavilion

December 19th, 2008 5:03 PM

Bagged: Chanel’s Mobile Art Pavilion

Color us Coco-friendly black and white, but don’t color us surprised: the latest victim of these troubled times is the Zaha Hadid-designed Chanel Mobile Art Pavilion. Somewhat inexplicable even in a flush economy, the traveling, snail-shaped guerrilla gallery, built to house interpretations of Chanel’s iconic 2.55 handbag by such artists as Sylvie Fleury, David Levinthal and Fabrice Hybert, has finally deflated after stops in Hong Kong, Tokyo and New York City. A company spokesperson tells WWD, “We will be concentrating on strategic growth investments.” Karl Lagerfeld, who didn’t even show up for the unveiling in Hong Kong, has no comment. Perhaps he’s too busy designing his next vanity stuffed animal. This time it had better come with a bag.

Tags: , , , , , ,

At Siemens, Bribery Was Just a Line Item

At Siemens, Bribery Was Just a Line Item

Oliver Lang/Agence France-Presse — Getty Images

Published: December 20, 2008


Skip to next paragraph
Michaela Rehle/Reuters

Reinhard Siekaczek, who was once a Siemens executive, has described a vast system for bribes across the globe.

REINHARD SIEKACZEK was half asleep in bed when his doorbell rang here early one morning two years ago.

Still in his pajamas, he peeked out his bedroom window, hurried downstairs and flung open the front door. Standing before him in the cool, crisp dark were six German police officers and a prosecutor. They held a warrant for his arrest.

At that moment, Mr. Siekaczek, a stout, graying former accountant for Siemens A.G., the German engineering giant, knew that his secret life had ended.

“I know what this is about,” Mr. Siekaczek told the officers crowded around his door. “I have been expecting you.”

To understand how Siemens, one of the world’s biggest companies, last week ended up paying $1.6 billion in the largest fine for bribery in modern corporate history, it’s worth delving into Mr. Siekaczek’s unusual journey.

A former midlevel executive at Siemens, he was one of several people who arranged a torrent of payments that eventually streamed to well-placed officials around the globe, from Vietnam to Venezuela and from Italy to Israel, according to interviews with Mr. Siekaczek and court records in Germany and the United States.

What is striking about Mr. Siekaczek’s and prosecutors’ accounts of those dealings, which flowed through a web of secret bank accounts and shadowy consultants, is how entrenched corruption had become at a sprawling, sophisticated corporation that externally embraced the nostrums of a transparent global marketplace built on legitimate transactions.

Mr. Siekaczek (pronounced SEE-kah-chek) says that from 2002 to 2006 he oversaw an annual bribery budget of about $40 million to $50 million at Siemens. Company managers and sales staff used the slush fund to cozy up to corrupt government officials worldwide.

The payments, he says, were vital to maintaining the competitiveness of Siemens overseas, particularly in his subsidiary, which sold telecommunications equipment. “It was about keeping the business unit alive and not jeopardizing thousands of jobs overnight,” he said in an interview.

Siemens is hardly the only corporate giant caught in prosecutors’ cross hairs.

Three decades after Congress passed a law barring American companies from paying bribes to secure foreign business, law enforcement authorities around the world are bearing down on major enterprises like Daimler and Johnson & Johnson, with scores of cases now under investigation. Both companies declined comment, citing continuing investigations.

Albert J. Stanley, a legendary figure in the oil patch and the former chief executive of the KBR subsidiary of Halliburton, recently pleaded guilty to charges of paying bribes and skimming millions for himself. More charges are coming in that case, officials say.

But the Siemens case is notable for its breadth, the sums of money involved, and the raw organizational zeal with which the company deployed bribes to secure contracts. It is also a model of something that was once extremely rare: cross-border cooperation among law enforcement officials.

German prosecutors initially opened the Siemens case in 2005. American authorities became involved in 2006 because the company’s shares are traded on the New York Stock Exchange.

In its settlement last week with the Justice Department and the Securities and Exchange Commission, Siemens pleaded guilty to violating accounting provisions of the Foreign Corrupt Practices Act, which outlaws bribery abroad.

Although court documents are salted throughout with the word “bribes,” the Justice Department allowed Siemens to plead to accounting violations because it cooperated with the investigation and because pleading to bribery violations would have barred Siemens from bidding on government contracts in the United States. Siemens doesn’t dispute the government’s account of its actions.

Matthew W. Friedrich, the acting chief of the Justice Department’s criminal division, called corruption at Siemens “systematic and widespread.” Linda C. Thomsen, the S.E.C.’s enforcement director, said it was “egregious and brazen.” Joseph Persichini Jr., the director of the F.B.I.’s Washington field office, which led the investigation, called it “massive, willful and carefully orchestrated.”

MR. SIEKACZEK’S telecommunications unit was awash in easy money. It paid $5 million in bribes to win a mobile phone contract in Bangladesh, to the son of the prime minister at the time and other senior officials, according to court documents. Mr. Siekaczek’s group also made $12.7 million in payments to senior officials in Nigeria for government contracts.

In Argentina, a different Siemens subsidiary paid at least $40 million in bribes to win a $1 billion contract to produce national identity cards. In Israel, the company provided $20 million to senior government officials to build power plants. In Venezuela, it was $16 million for urban rail lines. In China, $14 million for medical equipment. And in Iraq, $1.7 million to Saddam Hussein and his cronies.

The bribes left behind angry competitors who were shut out of contracts and local residents in poor countries who, because of rigged deals, paid too much for necessities like roads, power plants and hospitals, prosecutors said.

Because government contracting is an opaque process and losers don’t typically file formal protests, it’s difficult to know the identity of competitors who lost out to Siemens. Companies in the United States have long complained, however, that they face an uneven playing field competing overseas.

Ben W. Heineman Jr., a former general counsel at General Electric and a member of the American chapter of Transparency International, a nonprofit group that tracks corruption, says the enforcement of some antibribery conventions still remains scattershot. “Until you have energetic enforcement by the developed-world nations, you won’t get strong antibribery programs or high-integrity corporate culture,” he said.

Afghanistan, Haiti, Iraq, Myanmar and Somalia are the five countries where corporate bribery is most common, according to Transparency International. The S.E.C. complaint said Siemens paid its heftiest bribes in China, Russia, Argentina, Israel and Venezuela.

“Crimes of official corruption threaten the integrity of the global marketplace and undermine the rule of law in the host countries,” said Lori Weinstein, the Justice Department prosecutor who oversaw the Siemens case.

All told, Siemens will pay more than $2.6 billion to clear its name: $1.6 billion in fines and fees in Germany and the United States and more than $1 billion for internal investigations and reforms.

Siemens’s general counsel, Peter Y. Solmssen, in an interview outside a marble-lined courtroom in Washington, said the company acknowledged that bribes were at the heart of the case. “This is the end of a difficult chapter in the company’s history,” he said. “We’re glad to get it behind us.”

Mr. Siekaczek, who cooperated with German authorities after his arrest in 2006, has already been sentenced in Germany to two years’ probation and a $150,000 fine. During a lengthy interview in Munich, a few blocks from the Siemens world headquarters, he provided an insider’s account of corruption at the company. The interview was his first with English-language news outlets.

“I would never have thought I’d go to jail for my company,” Mr. Siekaczek said. “Sure, we joked about it, but we thought if our actions ever came to light, we’d all go together and there would be enough people to play a game of cards.”

Mr. Siekaczek isn’t a stereotype of a white-collar villain. There are no Ferraris in his driveway, or villas in Monaco. He dresses in jeans, loafers and leather jackets. With white hair and gold-rimmed glasses, he passes for a kindly grandfather — albeit one who can discuss the advantages of offshore bank accounts as easily as last night’s soccer match.

SIEMENS began bribing long before Mr. Siekaczek applied his accounting skills to the task of organizing the payments.

World War II left the company shattered, its factories bombed and its trademark patents confiscated, according to American prosecutors. The company turned to markets in less developed countries to compete, and bribery became a reliable and ubiquitous sales technique.

“Bribery was Siemens’s business model,” said Uwe Dolata, the spokesman for the association of federal criminal investigators in Germany. “Siemens had institutionalized corruption.”

Before 1999, bribes were deductible as business expenses under the German tax code, and paying off a foreign official was not a criminal offense. In such an environment, Siemens officials subscribed to a straightforward rule in pursuing business abroad, according to one former executive. They played by local rules.

Inside Siemens, bribes were referred to as “NA” — a German abbreviation for the phrase “nützliche Aufwendungen” which means “useful money.” Siemens bribed wherever executives felt the money was needed, paying off officials not only in countries known for government corruption, like Nigeria, but also in countries with reputations for transparency, like Norway, according to court records.

In February 1999, Germany joined the international convention banning foreign bribery, a pact signed by most of the world’s industrial nations. By 2000, authorities in Austria and Switzerland were suspicious of millions of dollars of Siemens payments flowing to offshore bank accounts, according to court records.

Rather than comply with the law, Siemens managers created a “paper program,” a toothless internal system that did little to punish wrongdoers, according to court documents.

Mr. Siekaczek’s business unit was one of the most egregious offenders. Court documents show that the telecommunications unit paid more than $800 million of the $1.4 billion in illegal payments that Siemens made from 2001 to 2007. Managers in the telecommunications group decided to deal with the possibility of a crackdown by making its bribery procedures more difficult to detect.

So, on one winter evening in late 2002, five executives from the telecommunications group met for dinner at a traditional Bavarian restaurant in a Munich suburb. Surrounded by dark wood panels and posters celebrating German engineering, the group discussed how to better disguise its payments, while making sure that employees didn’t pocket the money, Mr. Siekaczek said.

To handle the business side of bribery, the executives turned to Mr. Siekaczek, a man renowned within the company for his personal honesty, his deep company loyalty — and his experiences in the shadowy world of illegal bribery.

“It had nothing to do with being law-abiding, because we all knew what we did was unlawful.” Mr. Siekaczek said. “What mattered here was that the person put in charge was stable and wouldn’t go astray.”

Although Mr. Siekaczek was reluctant to take the job offered that night, he justified it as economic necessity. If Siemens didn’t pay bribes, it would lose contracts and its employees might lose their jobs.

“We thought we had to do it,” Mr. Siekaczek said. “Otherwise, we’d ruin the company.”

Indeed, he considers his personal probity a point of honor. He describes himself as “the man in the middle,” “the banker” or, with tongue in cheek, “the master of disaster.” But, he said, he never set up a bribe. Nor did he directly hand over money to a corrupt official.

German prosecutors say they have no evidence that he personally enriched himself, though German documents show that Mr. Siekaczek oversaw the transfer of some $65 million through hard-to-trace offshore bank accounts.

“I was not the man responsible for bribery,” he said. “I organized the cash.”

Mr. Siekaczek set things in motion by moving money out of accounts in Austria to Liechtenstein and Switzerland, where bank secrecy laws provided greater cover and anonymity. He said he also reached out to a trustee in Switzerland who set up front companies to conceal money trails from Siemens to offshore bank accounts in Dubai and the British Virgin Islands.

Each year, Mr. Siekaczek said, managers in his unit set aside a budget of about $40 million to $50 million for the payment of bribes. For Greece alone, Siemens budgeted $10 million to $15 million a year. Bribes were as high as 40 percent of the contract cost in especially corrupt countries. Typically, amounts ranged from 5 percent to 6 percent of a contract’s value.

The most common method of bribery involved hiring an outside consultant to help “win” a contract. This was typically a local resident with ties to ruling leaders. Siemens paid a fee to the consultant, who in turn delivered the cash to the ultimate recipient.

Siemens has acknowledged having more than 2,700 business consultant agreements, so-called B.C.A.’s, worldwide. Those consultants were at the heart of the bribery scheme, sending millions to government officials.

MR. SIEKACZEK was painfully aware that he was acting illegally. To protect evidence that he didn’t act alone, he and a colleague began copying documents stored in a basement at Siemens’s headquarters in Munich that detailed the payments. He eventually stashed about three dozen folders in a secret hiding spot.

In 2004, Siemens executives told him that he had to sign a document stating he had followed the company’s compliance rules. Reluctantly, he signed, but he quit soon after. He continued to work for Siemens as a consultant before finally resigning in 2006. As legal pressure mounted, he heard rumors that Siemens was setting him up for a fall.

“On the inside, I was deeply disappointed. But I told myself that people were going to be surprised when their plan failed,” Mr. Siekaczek recalled. “It wasn’t going to be possible to make me the only one guilty because dozens of people in the business unit were involved. Nobody was going to believe that one person did this on his own.”

The Siemens scheme began to collapse when investigators in several countries began examining suspicious transactions. Prosecutors in Italy, Liechtenstein and Switzerland sent requests for help to counterparts in Germany, providing lists of suspect Siemens employees. German officials then decided to act in one simultaneous raid.

The police knocked on Mr. Siekaczek’s door on the morning of Nov. 15, 2006. Some 200 other officers were also sweeping across Germany, into Siemens’s headquarters in Munich and the homes of several executives.

In addition to Mr. Siekaczek’s detailed payment records, investigators secured five terabytes of data from Siemens’s offices — a mother lode of information equivalent to five million books. Mr. Siekaczek turned out to be one of the biggest prizes. After calling his lawyer, he immediately announced that he would cooperate.

Officials in the United States began investigating the case shortly after the raids became public. Knowing that it faced steep fines unless it cooperated, Siemens hired an American law firm, Debevoise & Plimpton, to conduct an internal investigation and to work with federal investigators.

As German and American investigators worked together to develop leads, Debevoise and its partners dedicated more than 300 lawyers, forensic analysts and staff members to untangle thousands of payments across the globe, according to the court records. American investigators and the Debevoise lawyers conducted more than 1,700 interviews in 34 countries. They collected more than 100 million documents, creating special facilities in China and Germany to house records from that single investigation. Debevoise and an outside auditor racked up 1.5 million billable hours, according to court documents. Siemens has said that the internal inquiry and related restructurings have cost it more than $1 billion.

Siemens officials “made it crystal clear that they wanted us to get to the bottom of this and follow it wherever the evidence led,” said Bruce E. Yannett, a Debevoise partner.

AT the same time, Siemens worked hard to purge the company of some senior managers and to reform company policies. Several senior managers have been arrested. Klaus Kleinfeld, the company’s C.E.O., resigned in April 2007. He has denied wrongdoing and is now head of Alcoa, the aluminum giant. Alcoa said that the company fully supports Mr. Kleinfeld and declined to comment further.

Last year, Siemens said in S.E.C. filings that it had discovered evidence that former officials had misappropriated funds and abused their authority. In August, Siemens said it seeks to recover monetary damages from 11 former board members for activities related to the bribery scheme. Negotiations on that matter are continuing.

Earlier this year, Siemens’s current chief executive, Peter Löscher, vowed to make Siemens “state of the art” in anticorruption measures.

“Operational excellence and ethical behavior are not a contradiction of terms,” the company said in a statement. “We must get the best business — and the clean business.”

Siemens still faces legal uncertainties. The Justice Department and German officials said that investigations were continuing and that current and former company officials might face prosecution.

Legal experts say Siemens is the latest in a string of high-profile cases that are changing attitudes about corruption. Still, they said, much work remains.

“I am not saying the fight against bribing foreign public officials is a fight full of roses and victories,” said Nicola Bonucci, the director of legal affairs for the Organization for Economic Cooperation and Development, which is based in Paris and monitors the global economy. “But I am convinced that it is something more and more people are taking seriously.”

For his part, Mr. Siekaczek is uncertain about the impact of the Siemens case. After all, he said, bribery and corruption are still widespread.

“People will only say about Siemens that they were unlucky and that they broke the 11th Commandment,” he said. “The 11th Commandment is: ‘Don’t get caught.’ ”

This article is a joint report by ProPublica, a nonprofit investigative journalism organization, PBS’s "Frontline" and The New York Times. A related documentary will be broadcast on “Frontline” on April 7.

2008年12月20日 星期六

Rick Warren 傳教創新收括

December 19, 2008

The Rick Roll

President-elect Barack Obama angered liberals on Wednesday when he announced that evangelical minister Rick Warren would deliver the invocation at his Inauguration.

Warren, the pastor of the Saddleback Church, in Orange County, California, and a best-selling author, has been courted by politicians across the spectrum. In an October 2006 interview with David Remnick, Obama contrasted Warren and his willingness to talk about poverty with the “hard Christian right.” But Warren is still a social conservative, and recently compared gay marriage to incest.

In Malcolm Gladwell’s 2005 “Letter from Saddleback,” Warren was portrayed as an entrepreneur whose megachurch and books provided a model for building community in exurban America:

Warren’s great talent is organizational. He’s not a theological innovator. When he went from door to door, twenty-five years ago, he wasn’t testing variants on the Christian message. As far as he was concerned, the content of his message was nonnegotiable. Theologically, Warren is a straight-down-the-middle evangelical. What he wanted to learn was how to construct an effective religious institution. His interest was sociological. Putnam compares Warren to entrepreneurs like Ray Kroc and Sam Walton, pioneers not in what they sold but in how they sold. The contemporary thinker Warren cites most often in conversation is the management guru Peter Drucker, who has been a close friend of his for years. Before Warren wrote “The Purpose-Driven Life,” he wrote a book called “The Purpose-Driven Church,” which was essentially a how-to guide for church builders. He’s run hundreds of training seminars around the world for ministers of small-to-medium-sized churches. At the beginning of the Internet boom, he created a Web site called pastors.com, on which he posted his sermons for sale for four dollars each. There were many pastors in the world, he reasoned, who were part time. They had a second, nine-to-five job and families of their own, and what little free time they had was spent ministering to their congregation. Why not help them out with Sunday morning? The Web site now gets nearly four hundred thousand hits a day.

Lauren Collins, in a Talk story for the August 11, 2008, issue of the magazine, spoke to Warren before a August 16th forum he was hosting between Obama and McCain:

Warren, who favors Hawaiian shirts over suits, wants “to sit down and do the sort of David Frost or the Charlie Rose interview,” and he gave a preview of some of the topics he might broach. “In most debates, ninety-five per cent of the questions have had to do with hot-button political issues—it’s the war, it’s oil, it’s the border, it’s health care,” he said, and explained that he finds these lines of inquiry “really quite short-term.” He offered some alternatives. Q.: “Are you a leader or a manager?” Q.: “Tell me the most difficult decision you’ve ever had to make.” Think Human Resources.

About a month later, Peter Boyer wrote about how, at the forum, Obama stumbled over a Warren question on when life begins:

The prospect of McCain’s appearance with Barack Obama at Pastor Rick Warren’s Saddleback Church, on August 16th, made many evangelicals cringe. Mohler was among those who expected the worst from what seemed, given Warren’s disdain for sharp partisanship, a venue perfectly tailored to Obama’s strengths. But McCain surprised. For many evangelicals, the event turned on the question, posed by Warren to both candidates separately, “At what point does a baby get human rights, in your view?” Obama’s response, characteristically nuanced, came across as a dodge. “Well,” he began, “I think that, whether you’re looking at it from a theological perspective or a scientific perspective, answering that question with specificity, you know, is above my pay grade.” Asked the same question, McCain didn’t hesitate. “At the moment of conception,” he said, to the loud approval of the congregation.


2008年12月18日 星期四

The Siemens scandal

The Siemens scandal

Bavarian baksheesh

Dec 17th 2008 | BERLIN
From The Economist print edition

The stench of bribery at Siemens signals a wider rot in Europe


WHEN Siemens, Europe’s biggest engineering firm, adopted the slogan “be inspired” in the mid-1990s, bribery was not what it had in mind. But no one can accuse its managers of lacking inspiration when it came to devising novel ways to funnel huge sums in backhanders to corrupt officials and politicians across the globe. On Monday December 15th Siemens pleaded guilty to charges of bribery and corruption and agreed to pay fines of $800m in America and €395m ($555m) in Germany, in addition to an earlier fine of €201m.

There is something almost touching about the candour and trust with which Siemens went about a very dirty business. Take the three “cash desks” it set up in its offices, to which employees could bring empty suitcases to be filled with cash. As much as a €1m ($1.4m) could be withdrawn at a time to win contracts for its telecoms-equipment division, according to America’s Department of Justice (DoJ).

Surprisingly, considering their crooked purpose, the cash desks seemed to have operated on an honour system. Few questions were asked, no documents were required and managers who applied for money were allowed to approve their own requests. Until 1999 Siemens openly claimed tax deductions for bribes, many of which were listed in its accounts as “useful expenditure”. From 2001-04 some $67m was merrily carted off in suitcases. “There was no complex financial structuring such as you would find among drug smugglers or money launderers,” says Mark Pieth, chairman of the working group on bribery at the OECD, a club of industrialised nations. “People felt confident that they were doing nothing wrong.”

Even when they knew there were doing wrong, they could not break the habit. Illicit payments continued for years after Germany outlawed the bribery of foreign officials in 1999, and after Siemens listed its shares on the New York Stock Exchange in 2001, which made it subject to America’s tough anti-bribery laws. Instead of counting money in the office, the firm simply wrote cash cheques which were deposited in accounts, kept off its own books, from which nefarious payments could be made. A lot of the dirty work was outsourced to “business consultants”. As Siemens half-heartedly clamped down on corruption, its managers took ever more eccentric steps to avoid getting caught. When authorising payments, many managers signed on removable sticky notes.

The sums involved are staggering. Some $805m was handed over in bribes to foreign officials to help Siemens win contracts over about six years after the firm’s American listing, according to the DoJ. And the brazenness of the firm’s bribe-paying points to a rotten corporate culture pervasive across Germany at the time. “The great majority of companies operating in the international market were well aware that German law—and the law of most OECD countries—allowed foreign bribery and even subsidised this,” says Peter Eigen, the founder of Transparency International, an anti-corruption campaigning group.

That, at least, has changed. Mr Pieth thinks about half of the 30 biggest German and French companies are being investigated or prosecuted for bribing foreign officials. And Germany has steadily improved its rankings in Transparency International’s “Bribe Payers Index”, moving from ninth-least corrupt in 1999 to fifth in 2008.

Yet the Siemens affair also shows how far Europe still lags behind America when it comes to prosecuting bribery. Few close to the case think it would have progressed nearly as far had Siemens not invited in a bevy of lawyers from Debevoise & Plimpton, a New York law firm, in the hope of winning leniency from American prosecutors. The lawyers pored over its books and interviewed its staff in the largest-ever private investigation (and at €204m, probably the costliest too) of its kind.

Ellen Podgor, an expert in white-collar crime at Stetson University in St Petersburg, Florida, reckons that confessing all had less to do with minimising the fine Siemens had to pay than with avoiding being barred from doing business with the American government. “The amount of money being paid is not the crucial factor,” says Ms Podgor. “The crucial factor is not being doomed.” If only European prosecutors could inspire the same dread.





醫 改會執行長劉梅君說,手術病人多已被麻醉、處昏迷狀態,缺乏逃生能力,台大事件凸顯手術房防災演習的重要,未例行演練,危害醫護人員與病人生命。衛生署醫 事處長石崇良說,演習沒有必要當場執行,可在模擬手術房進行,北市衛生局下周將提報台大火警調查報告,屆時會追究是否懲處,及研究改進方案。









2008年12月13日 星期六

Bernard L. Madoff's $50 billion Ponzi scheme

'All Just One Big Lie'
Bernard Madoff was a Wall Street whiz with a golden reputation. Investors, including Jewish charities, entrusted him with billions. It's gone.
(By Binyamin Appelbaum, David S. Hilzenrath and Amit R. Paley, The Washington Post)


Ruby Washington/The New York Times

On Wall Street, his name is legendary. With money he had made as a lifeguard on the beaches of Long Island, he built a trading powerhouse that had prospered for more than four decades. At age 70, he had become an influential spokesman for the traders who are the hidden gears of the marketplace.

But on Dec. 12, this consummate trader, Bernard L. Madoff, was arrested at his Manhattan home by federal agents who accused him of running a multibillion-dollar fraud scheme — perhaps the largest in Wall Street’s history.

The single count of securities fraud carries a maximum penalty of 20 years in prison and a maximum fine of $5 million.

Regulators have not yet verified the scale of the fraud. But the criminal complaint filed against Mr. Madoff on Thursday in federal court in Manhattan reports that he estimated the losses at $50 billion.

According to the most recent federal filings, Bernard L. Madoff Investment Securities operated more than two dozen funds overseeing $17 billion.

These funds have been widely marketed to wealthy investors, hedge funds and other institutional customers for more than a decade, although an S.E.C. filing in the case said the firm reported having 11 to 23 clients at the beginning of 2008.

The Madoff funds attracted investors with the promise of high returns and low fees. One of Mr. Madoff’s more prominent funds, the Fairfield Sentry fund, reported having $7.3 billion in assets in October 2008 and claimed to have paid more than 11 percent interest each year through its 15-year track record.

Founded in 1960, by the early 1980s, his firm was one of the largest independent trading operations in the securities industry. The company had around $300 million in assets in 2000 at the height of the Internet bubble and ranked among the top trading and securities firms in the nation.

Mr. Madoff ran the business with several family members, including his brother Peter, his nephew Charles, his niece Shana and his sons Mark and Andrew.

在馬多夫假投資真詐財案件中,損失最大的可能是Fairfield Sentry和Kingate兩檔避險基金,估計損失逾100億美元。紐約和佛羅里達兩地的散戶投資人也被詐騙數十億美元。

熟悉內情人士指出,本案最大輸家可能是投資人諾爾(Walter Noel)的Fairfield Greenwich集團,旗下Fairfield Sentry公司有73億美元交給馬多夫投資。另一家Kingate Management公司旗下的Kingate Global Fund,也託付馬多夫28億美元。


另一大客戶費克斯資產管理公司(Fix Asset Management)在馬多夫公司的帳戶內至少有4億美元。創辦人之子約翰.費克斯說:「我們非常震驚,因為過去幾個月我們要求贖回都能順利拿到錢。我們對這整件事感到十分訝異。」

把錢交給馬多夫的散戶也不少。許多人和他有私交,但對他的投資策略一無所悉。馬多夫穿梭於紐約市和佛羅里達州,兩地俱樂部會員可能損失慘重,包括紐約長島 的Fresh Meadows鄉村俱樂部和Glen Oaks俱樂部,佛羅里達的Boca Rio高球俱樂部及棕櫚灘俱樂部。馬多夫是Fresh Meadow的會員,在棕櫚灘俱樂部則有經紀人,另有至少一名主力投資人幫忙介紹客源。

紐約一名68歲散戶投資人說,她和73歲的先生交給馬多夫1,200萬美元投資。每月逾六頁的交易紀錄顯示,馬多夫買賣頻繁。現在夫妻倆的積蓄可能化為烏 有,只剩6萬美元的銀行存款。住在休士頓的退休理財顧問葛琳伯格說,她已故的先生自1987年起在馬多夫公司投資,21年間財富增加十倍,從來沒有虧損紀 錄。她說,簡直不敢相信馬多夫會詐財。

The zoning lawyer in Miami trusted him because his father had dealt profitably with him for decades. The officers of a little charity in Massachusetts respected him and relied on his advice.

Wealthy men like J. Ezra Merkin, the chairman of GMAC; Fred Wilpon, the principal owner of the New York Mets; and Norman Braman, who owned the Philadelphia Eagles, simply appreciated the steady returns he produced, regardless of market conditions.

But these clients of Bernard L. Madoff had this in common: They chose him to oversee much of their personal wealth.

And now, they fear, they have lost it.

While Mr. Madoff is facing federal criminal charges, accused by federal prosecutors of operating a vast $50 billion Ponzi scheme, many of his clients are facing an abrupt reversal of fortune that is the stuff of nightmares.

“There are people who were very, very well off a few days ago who are now virtually destitute,” said Brad Friedman, a lawyer with the Milberg firm in Manhattan. “They have nothing left but their apartments or homes — which they are going to have to sell to get money to live on.”

From New York to Palm Beach, business associates of Mr. Madoff spent Friday assessing the damage, the extent of which will not be known for some time. Many invested with Mr. Madoff through other funds and may not know that their money is at risk.

Emergency meetings were being held at country clubs, schools and charities to assess the potential losses on their investments and to look for options.

There is not much guidance available yet from regulators. On Friday, a federal judge appointed a receiver to oversee the Madoff firm’s assets and customer accounts. A Web site is being set up to keep customers informed, but no one is sure yet whether any sort of safety net will catch the most vulnerable investors.

For Stephen J. Helfman, a lawyer in Miami whose father had opened an account with Mr. Madoff more than 30 years ago, the news on Thursday came as a hammer blow.

“The name ‘Madoff’ has overnight gone from being revered to reviled in the Helfman family,” Mr. Helfman said on Friday. His grandmother, at 98, relied on her Madoff money to pay for round-the-clock care, he said, and his two children’s college funds were wiped out.

“Thirty-six years of loyalty, through two generations, and this is what we get,” he said.

The news was equally devastating for the Robert I. Lappin Charitable Foundation in Salem, Mass., which works to reverse the dilution of Jewish identity through intermarriage and assimilation by sending teenagers to Israel and supporting other Jewish education efforts.

The foundation was forced on Friday to dismiss its small staff and shut down its programs to cope with its losses in the Madoff funds, according to Deborah Coltin, its executive director.

“We’ve canceled everything as of today, everything,” she said tearfully.

Ms. Coltin said she did not know how the little foundation came to be so exposed to the Madoff firm. Its most recent tax filings show that it had $7 million at the end of 2006, with $143,344 in stocks and the rest in “government securities.”

It reported the sale that year of “Bernie Madoff” securities, but did not explain what those securities were.

Sam Englebardt, a media investor in Los Angeles, said several relatives had entrusted virtually all of their assets to Mr. Madoff — and he understood why.

“It seems like a huge over-allocation, I know,” Mr. Englebardt said. “But remember, they had started out small and invested over 5 years, 15 years, 30 years — and every year they got a great return, and they could always take money out without ever having a problem.”

As that track record lengthened, his relatives gradually entrusted more of their savings to Mr. Madoff, he said. “I suspect that is what has happened across the board,” he added. “People came to trust him so much that, eventually, they trusted him with everything.”

Such stories were repeated in e-mail messages and telephone calls throughout the day on Friday. A woman in Brooklyn whose father died just weeks ago found that his entire estate and a substantial portion of her stepmother’s money was invested with Mr. Madoff. A law school official in Massachusetts fears he has lost millions in the collapse of the Madoff operation.

Some wealthy victims, of course, can afford to seek redress on their own. But for them, litigation seems the only certainty.

Throughout the rumor-fueled hedge fund world on Friday, money managers were comparing notes and assessing losses. By all accounts, they run broad and deep — in the billions.

Mr. Merkin, a prominent philanthropist and the founder of several hedge funds, including one called Ascot Partners, jolted his clients on Thursday with a letter announcing that “substantially all” of that fund’s $1.8 billion in assets were invested with Mr. Madoff.

“As one of the largest investors in our fund, I have also suffered major losses from this catastrophe,” Mr. Merkin said in the letter. “We have retained counsel to determine what our next steps should be.”

Some of Mr. Merkin’s investors have also “retained counsel.” Harry Susman, a lawyer in the Houston office of Susman Godfrey, said he was talking with several clients about legal options.

“These investors were never aware that all of their money was invested with Madoff,” Mr. Susman said. “They are obviously shocked.”

Sterling Equities and the Wilpon family acknowledged on Friday that they had money at risk in the Madoff scandal.

“We are shocked by recent events and, like all investors, will continue to monitor the situation,” said Richard C. Auletta, a spokesman for Sterling and the Wilpons.

The Mets organization issued a statement saying that the scandal would not derail its new Citi Field stadium project in Queens or “affect the day-to-day operations and long-term plans of the Mets organization.”

A lawyer for Norman Braman of Miami, a wealthy retired retailer and the former owner of the Philadelphia Eagles football team, confirmed that Mr. Braman, too, had money locked up and perhaps lost in the Madoff mess.

And Bramdean Alternatives, a London asset manager run by Nicola Horlick, saw its share price plummet nearly 36 percent on Friday after it announced that nearly 10 percent of its holdings were caught in the Madoff scandal.

Mr. Madoff has resigned from his positions at Yeshiva University, where he was treasurer for the university’s board and deeply involved in the business school.

“Our lawyers and accountants are investigating all aspects of his relationship to Yeshiva University,” said Hedy Shulman, a spokeswoman for the university.

The most recent tax filings for the university show that its endowment fund, a separate charity, was heavily invested in hedge funds and other nontraditional alternatives at the end of its fiscal year in 2006.

The school paper, the Yeshiva Commentator, recently reported that its endowment’s value had dropped to $1.4 billion from $1.8 billion — before the scandal broke.

Reporting was contributed by Stephanie Strom, Julie Creswell, Eric Konigsberg, Zachery Kouwe and Charles Bagli.