Finance news. My opinion.

A stock trader dubbed the Octopussy because he reached for so much inside information was sentenced Wednesday to 10 years in prison and a California finance researcher convicted in a separate but related insider trading case received a four-year prison term as two judges tried to send a stern warning to Wall Street.

“Insider trading is very, very hard to detect. Because of that, it has to be dealt with harshly,” U.S. District Judge Richard Sullivan said as he gave 34-year-old Zvi Goffer one of the longest prison terms ever handed down in an insider trading case. He added: “These crimes are not going to be tolerated, certainly not in my courtroom.”

U.S. District Judge Jed Rakoff said it was important that each sentence send a tougher message to deter inside trading than previously thought necessary.

“It’s hard to detect but easy to commit so the temptations are great,” Rakoff said as he sentenced Winifred Jiau, 43, of Fremont, Calif., who has remained imprisoned for nine months because it was determined that the Taiwan-born researcher was a risk to flee. Still, the sentence was only half of what was called for by federal sentencing guidelines.

The Israeli-born Goffer, who lives in Brooklyn, was convicted with two others in June in a conspiracy to pay bribes to coax confidential information out of two shady lawyers at a Manhattan firm. The arrests were part of what prosecutors called the biggest hedge fund insider trading case in history. In all, more than two dozen people have been convicted in the probe.

The sentencings Wednesday came weeks before the scheduled sentencing next month of Raj Rajaratnam, a one-time billionaire hedge fund founder who was convicted on insider trading charges earlier this year. Prosecutors say he made more than $50 million through illegal trades and are seeking a prison term of more than 24 years.

When the charges against Rajaratnam and Goffer were announced in the fall of 2009, prosecutors said they had made unprecedented use of wiretaps, in part because white collar criminals were starting to use techniques to cover up their crimes that made them resemble common criminals.

The wiretaps eventually led to a separate probe of researchers in the securities industry who enable illegal secrets to be passed between hedge fund managers and employees of public companies. Jiau was among 13 people arrested last year in that probe.

At his sentencing, Goffer apologized to investors in the stocks in which he had an unfair advantage, saying: “They didn’t have the information I had.”

He began crying when he apologized to his brother, Emanuel, who was convicted at trial along with him and is awaiting sentencing. A third defendant, Michael Kimelman, also awaits sentencing.

“He knows I love him,” he said of his brother. Zvi Goffer said he didn’t always understand the seriousness of the crime but had awakened to its tragic consequences.

“Now today I have to face it and I am terrified,” he said.

The sentence caused Goffer’s wife to break down in sobs.

“What am I going to do?” she called out in court at one point. “It’s not fair!” A woman beside her then shouted a profanity, causing Sullivan to rise from the bench and threaten to bring in U.S. marshals to make arrests.

“This is a courtroom, not a street corner,” he said. “I am not going to tolerate this.”

Goffer was convicted by a jury that viewed evidence that he had arranged to pay two attorneys nearly $100,000 in 2007 and 2008 for inside tips on mergers and acquisitions.

During the two-week trial, prosecutors introduced evidence that Goffer gave conspirators prepaid cellular telephones in an effort to reduce detection by law enforcement.

The judge said Goffer had repeatedly demonstrated that he knew he was breaking the law and didn’t care.

“It’s a game that you and others seem to find exciting,” he said, adding that Goffer had a gambler’s mentality that led him to “double down and go to trial” when he would have shaved three years off his prison sentence by accepting responsibility before trial and admitting his crimes.

“You went for broke. You gambled and lost on that, too,” Sullivan said.

Before starting his own firm, Goffer worked for nine months for Rajaratnam.

Jiau was convicted of charges that she conspired to accept cash and gifts to feed inside information to hedge funds.

Jiau, a U.S. citizen, worked for two years as a consultant for Primary Global Research, a Mountain View, Calif.-based company.

Prosecutors said she earned more than $200,000 by selling “tomorrow’s news today” about earnings and performance of publicly traded companies. The information, they say, was communicated in code with her co-defendants, sometimes using “cooks” to refer to tipsters, “recipe” for the inside information and “sugar” for what she was paid for

Lawyers for both Jiau and Goffer said their clients were left in financial ruin and their careers were destroyed.

Jiau told Rakoff she was “sorry for being here.”

She also apologized to her dog, a Golden Retriever named Hunter who is being cared for by friends, saying: “I’m sorry I broke my promise to take care of you and be with you.”

Source

Twenty-five of the 100 largest U.S. corporations paid their chief executives more last year than they paid in federal income taxes, according to a report released Wednesday.

The nonprofit Institute for Policy Studies says the 25 CEOs averaged $16.7 million in salary and other 2010 compensation.

Most of the companies they ran, meanwhile, came out ahead at tax time. They collected tax refunds that averaged $304 million, based on a review of public filings. The think tank says the 25 firms that paid out more in CEO compensation than U.S. taxes reported average global profits of $1.9 billion.

The institute, based in Washington, describes itself as a community of public scholars that works with social movements to promote democracy and challenge corporate influence and military power.

Source

DuPont Co. has told federal officials it is willing to stop the sale of a new herbicide that is blamed for damaging trees in many parts of the country and is the subject of several lawsuits.

The U.S. Environmental Protection Agency acknowledged DuPont’s offer to pull Imprelis from the market in a letter sent Wednesday to DuPont CEO Ellen Kullman. At the same time, the EPA said it was evaluating the validity of DuPont’s claims that studies relating to Imprelis that it has turned over to federal regulators are confidential business information and cannot be disclosed to the public.

In a separate letter, the EPA said DuPont may have misbranded the herbicide because label directions and warnings are inadequate to protect non-target plant species from being harmed by the weedkiller.

Source

It

Egyptian security officials say a militant Islamist group has blown up a terminal along the Egyptian natural gas pipeline to Israel in the northern Sinai Peninsula.

Officials say Saturday’s attack on the terminal in al-Shulaq destroyed the last terminal before the line enters the sea on its way to Israel.

It is the third attack on the pipeline this month and the fifth since the 18-day uprising toppled President Hosni Mubarak in February.

While no one claimed responsibility, officials accused a militant Bedouin group for the attack.

Clashes between the group and security forces killed 5 people Friday.

The officials spoke on condition of anonymity because they were not authorized to brief the media.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

CAIRO (AP) _ Tens of thousands of ultraconservative Muslims in long beards, robes and prayer caps thronged Cairo’s central Tahrir Square in a massive show of force Friday, calling for the implementation of strict Islamic laws and sparring with liberal activists over their visions for a post-revolution Egypt.

It was the first rally with religious overtones in Egypt, and one of the largest, since the uprising that forced President Hosni Mubarak to step down in mid-February. The strong showing by the Islamists demonstrated their powerful organizational abilities, which will likely help them in parliamentary elections later this year.

“Islamic. Islamic. Not Western or Eastern. No liberal or secular,” chants of Salafis, who follow a strict form of Islam, echoed through the square. Others shouted: “With our soul and blood we defend you Islam.”

They unfurled an Egyptian flag, removing the central emblem of an eagle and replacing the Islamic slogan: “There is no god but God and Muhammad is his prophet,” similar to the insignia on the Saudi flag.

The youth activists who have been at the helm of mass protests calling for faster change from the country’s interim military rulers withdrew from the rally soon after Friday prayers, accusing the Islamists of violating an agreement to avoid divisive issues.

“While the civil organizations are trying to respect the effort to complete the revolution by unifying the ranks, the Islamic groups insisted on breaking the unity and assisting the military council in a deal that I think will divide this country in two,” said liberal activist Mustafa Shawki. “This is what we were afraid of.”

Several hundred protesters, mainly liberal and leftist groups, have camped out at the square for more than three weeks, demanding swifter justice for those blamed in the killing of nearly 900 protesters during the 18-day uprising and more measures to ensure Mubarak loyalists are purged from the government. It was a crowd vocally critical of the military council, which they accused of protecting Mubarak’s regime.

Most of the Islamic groups, however, say the military needs time to break with the past.

The decision by the Salafis and the Muslim Brotherhood, Egypt’s best organized political force, to participate significantly boosted the turnout. But instead of a day of unity as had been advertised, the Islamists decided to flex their muscle, using the epicenter of the protests to press demands for a strict version of Islamic law.

Some Salafi Islamist groups mobilized their members to the square to oppose the adoption of a set of guidelines for drafting a new constitution after parliamentary elections later this year. Buses from a number of cities transported followers, many who were in the square for the first time.

Liberal parties are worried religious groups will win a large share of parliament and force an Islamic influence on the constitution. The Islamists say nothing should restrict the newly elected parliament’s right to oversee the process of drafting the document.

“The liberals are talking about a civil state. This won’t work in Egypt,” said Tarek Shaheen, a 31-year-old resident of Ismailiya. “We want to prove to the outside world even before domestically that Egypt is Islamic, that it has a large Islamic trend and that we are not terrorists.”

While opposing the measure, Muslim Brotherhood members did not press the issue Friday sticking to the agreement.

Salafis are ultraconservatives, close to Saudi Arabia’s Wahhabi interpretation of Islam and more radical than the Brotherhood. They seek to emulate the austerity of Islam’s early days and oppose a wide range of practices like intermingling of the sexes that they view as “un-Islamic.” Many also reject all forms of Western cultural influence, and preach that authorities must be respected.

Mubarak’s regime cracked down heavily on Islamic groups, specifically the politicized Brotherhood, arrested thousands of its members. Salafi groups are new to the political scene in Egypt.

Many like Shaheen felt that Egypt’s Islamic identity is threatened, reflecting the growing mistrust between the different groups only months before the first parliamentary elections, the first after Mubarak’s ouster.

Egypt’s constitution, which has been suspended by the military rulers, set Islamic law as the basis for legislation and nobody has proposed changing that clause. But some Islamic groups believe the liberal groups will use the guidelines to introduce what they perceive as Western values.

“Our religion is the constitution,” said Saber Mohammed, a 27-year-old Cairene wearing a short white robe and head cap, sporting the traditional bushy beard of a Salafi.

Nourhan Zamzam, a 29-year-old banker who supports the call for a civil state, said the ultraconservative Islamist groups are vying for influence but have little experience.

For her, the Salafi stance only undermines pressure on the military by dividing the efforts of the protesters.

“This is actually a message to us, the revolutionaries, who are critical of the military council,” she said. “This is a message to scar us: look infighting between groups is coming.”

By sundown, a large number of Islamists began leaving the square peacefully and the sit-in continued.

It was more tense in other cities.

In the southern city of Assiut, Salafist protesters beat up a group of protesters from the Communist party trying to join their demonstration, deputy police chief Yosri el-Gammasi said. At one point, some in the crowd yelled back at a speaker who criticized the idea of constitutional guidelines.

In the Sinai city of el-Arish, government troops clashed with Islamic militants firing rocket-propelled grenades and other heavy weapons outside a police station. Four people were killed, including a military officer and three civilians, and 18 people injured.

South of the capital in Minya province, gunmen fired on a car carrying Christians, killing two and injuring two, a military official said. It was the second killing in two weeks in the predominantly Christian village of Roman. While the motive was unknown, similar events have sparked religious violence in the past.

Officials spoke on condition of anonymity because they weren’t authorized to brief the media.

Friday’s rally came a day after Egypt’s Justice Ministry said Mubarak, along with his two sons, his former security chief and seven others, will be tried Wednesday at a Cairo convention center. Mubarak, 83, faces charges of corruption and ordering the deadly use of force against protesters.

Source

What if someone comes to your door, trying to sell you a new vacuum cleaner? Will you bite?

If you have a vacuum cleaner that works, you probably tell the salesman to move along and leave you alone.

Some door-to-door sellers have found a way to turn a “No” into a “Yes” by making you believe they’re not selling anything at all. Here’s how it works.

They come to your door wearing a uniform of some kind — such as hard hat, boots and reflective vest — and talking about working with the local gas or hydro company.

They have to make sure your rented water heater is safe and energy efficient. Can they do a quick inspection?

Once they’re in your home, they can say the water heater must be replaced because it’s dangerously unsafe. Or it’s wasting energy, forcing up your utility bills.

You agree to a replacement because you think you’re dealing with someone qualified to inspect water heaters, a licensed technician — not, heaven forbid, a door-to-door salesman.

This scam has gone on for a while. It tends to heat up in the summer months.

Complaints and inquiries about rental water heater agreements jumped into third place on the Ontario consumer ministry’s Top 10 list last year — shooting ahead of motor vehicle purchases and sales.

(Complaints about collection agencies are still No. 1 in Ontario, followed by home renovations and repairs.)

Older seniors are especially susceptible to aggressive water heater pitches. Their adult children often ask me to sort out the bills.

Cheryl Charbonneau, for example, said her mother-in-law had replaced her rented water heater three times since 2009 after being told it was unsafe.

The woman, in her late 70s, didn’t realize each new water heater came with a long-term contract. The salespeople hadn’t told her and she hadn’t read the agreements.

At one point, she was getting bills from three companies at the same time. One company told her she could lose her house if she didn’t pay for 10 years, Charbonneau says.

Melanie Pineda, who contacted me last week, also had a disturbing story. She’s a pregnant mother of three boys under 5.

“A salesperson came to my door, saying his company had been called in by Enbridge Gas to inspect all the water heaters in our neighbourhood because they had rust issues.

“He came downstairs, found rust and told us we needed a replacement as soon as possible. Two days later, a shoddy installer came with a water heater and a young assistant.

“Now we’re left with leaking, a big puddle and a water shutdown. We need water to drink and bathe with. We called for service and we’re waiting.”

The company fixed her water heater later the same day after she contacted the Better Business Bureau. It reduced her contract to five years (from 10), but wouldn’t let her out of the deal despite the alleged misrepresentation.

Enpure Home Comfort, the firm she dealt with, didn’t respond to my email and phone inquiries. Its name came up again when a homeowner told me about a rented water heater that he’d inherited.

Rakesh Kumar Verma took possession of his home on June 7 after negotiating the sale in February. His agreement said the water heater was rented from Direct Energy.

Contemplating a renovation after he moved in, he called Direct Energy to ask about venting. That’s when he heard the tank was returned on June 2.

“The previous owner had signed with Enpure on May 27, since he thought he was dealing with Enbridge. He wasn’t told that a contract was involved.”

Verma is now locked into a 10-year contract unless he pays $1,050 to cancel early. If he keeps it, he has to pay $300 to change to a power-vented unit. And he can’t get a copy of the agreement signed by the previous owner.

Beware of high-pressure tactics by impostors. Ask for photo ID with their name and company affiliation before listening to a word of their pitch.

Finally, call the Ontario consumer ministry with questions or complaints at 1-800-889-9768 or 416-326-8800.

Ellen Roseman writes about personal finance and consumer issues. You can reach her at eroseman@thestar.ca.

Source

In the midst of its fight for survival, the owner of Saab Automobile on Monday announced plans to develop three new models together with a Chinese car company.

Swedish Automobile NV, previously known as Spyker Cars, said it aims to set up a joint venture with China’s Zhejiang Youngman Lotus Automobile Co. to design a small Saab model called 9-1, and two larger designs called 9-6 and 9-7.

Cash-strapped Saab has struggled to pay suppliers and staff, and production has been at a standstill for months. Last week, the company said it aims to resume production within two weeks, but workers remained idle Monday and will go on two weeks scheduled vacation July 25.

Saab spokeswoman Gunilla Gustavs said the plans for the new models are at an early stage and it remains unclear when the cars could reach the market.

Youngman will provide financing for the joint venture while Saab will be responsible for developing the models.

“We will now be able to develop a small entry level Saab, a car that has long been on the top of our wish list,” Swedish Automobile CEO Victor Muller said in a statement.

Separately Monday, Saab said it has completed a previously announced euro245 million ($356 million) deal to make Youngman and another Chinese firm, Pang Da Automobile Trade Co, part-owners in Swedish Automobile. The deal still requires regulatory approval.

It said the agreement also allows for Russian investor Vladimir Antonov to become part-owner of Swedish Automobile, if he obtains the necessary regulatory approvals.

Antonov has said he wants to inject between $50 million and $150 million into Saab, but is still waiting for an approval from the European Investment Bank.

The Russian was forced out of Spyker amid reports of money laundering when Spyker bought Saab from General Motors in 2010. He has denied those allegations and has never been charged.

Shares in Swedish Automobile rose by 13.7 percent to euro2.85 ($4.14) on the Amsterdam stock exchange.

Source

It may be bad news for the people in your corporate IT department, but much of their work may be moving to “the cloud.”

If the digital soothsayers are right, that personal computer in your office cubicle someday may function as nothing but a dumb screen. The real electronic brain

Falling energy prices cooled inflation in May and U.S. factories rebounded after natural disasters slowed production for the first time in nearly a year.

The latest economic data suggest two of the biggest factors that hampered the economy this spring _ high gas prices and supply disruptions stemming from the Japan crises _ are starting to ease.

Overall consumer prices rose 0.2 percent, the smallest increase in six months the Labor Department said. It was the first drop in energy costs in nearly a year.

Gas prices have fallen since peaking last month at a national average of $3.98 per gallon. On Tuesday, the national average price was roughly $3.69 per gallon. While that is giving motorists some relief, gas prices are still $1 higher than a year ago.

So-called “core” consumer prices, which exclude volatile food and energy, rose by the most in nearly three years last month. Economists say that’s mostly because temporary increases in cotton and other commodities are forcing up costs.

Inflation “is probably now close to peaking,” said Paul Ashworth, an economist at Capital Economics. “While the bigger monthly rise in core prices is a concern, a lot of it was due to temporary factors that could be reversed in the next few months.”

U.S. factories produced more business equipment and construction materials last month, the Federal Reserve said. That boosted manufacturing output 0.4 percent last month, the Federal Reserve said. The gain followed the first decline in 11 months of gains.

Overall industrial production was basically flat for the second month in a row. It was dragged down by a decline in utility activity caused by milder spring weather.

Ashworth said the report confirms that the April decline in factory output was a temporary lull. The March 11 earthquake in Japan created a parts shortage that affected U.S. car makers. And tornadoes in the U.S. slowed factory output in the South. Ashworth said factories are back to increasing production. But the rate of growth has slowed since last year.

“Certainly things have slowed down a bit, but I don’t think it’s a big deal,” Ashworth said. “Things seem to be getting back to normal in Japan, so supply disruptions should ease up and it should unwind itself.”

Economists expect factory output to keep growing in the coming months as Japanese automakers, such as Toyota and Honda, bring production at their U.S. plants back to pre-earthquake levels. Full production likely won’t be restored until fall.

Other reports Wednesday show the economy, for now, is still weak totally free credit score. A survey of manufacturers in the New York region found that activity slowed in June. The New York Federal Reserve’s Empire State index fell to -7.8, down from 12 the previous month. Any reading below zero indicates that the sector is shrinking.

And homebuilders are getting even more pessimistic, according to a report from the industry’s trade group. An index that measures builders’ sentiment fell to 13 in June. That’s the lowest level in nine months and just five points about the record low, reached in January 2009.

Some inflation can be healthy for the economy because it encourages people to spend and invest rather than sitting on their cash. More spending drives corporate growth, which makes businesses more likely to hire people.

But higher food and gas prices have hurt growth this year. Consumers have had to spend more at the grocery stores and to fill their tanks, leaving less money for spending on other goods and services, like appliances, furniture and vacations, that drive the economy.

Federal Reserve Chairman Ben Bernanke has said that the rise in food and gas prices would likely be temporary. The latest readings on consumer and wholesale inflation seem to support that view.

In addition to the drop in consumer gas prices, the government reported this week that wholesale food prices fell in May by the most in nearly a year. Much of that decline resulted from a sharp fall in vegetable and fruit prices. Most economists expect overall food prices to stabilize later this year.

Consumer prices rose 3.6 percent from June 2010 through May 2011, the biggest one-year gain since October 2008. The yearly gain in the index was only 1.1 percent as recently as November.

Excluding the volatile food and energy categories, which account for about 20 percent of the index, core prices rose only 1.5 percent in that same period. That’s below the Federal Reserve’s informal inflation target of about 2 percent.

Autos and apparel drove core consumer prices higher in May. New car prices rose 1.1 percent last month, after rising 0.7 percent in April. Auto dealers have fewer popular fuel-efficient models on their lots because of the supply disruptions. As a result, they are offering fewer deals to boost sales.

Clothing rose 1.2 percent in May, a result of higher cotton prices and increasing labor costs overseas, where most U.S. apparel is made.

Source

A 20-year-old woman who recited poems critical of Bahrain’s rulers _ and later claimed she was beaten in jail _ was sentenced Sunday to a year in prison as part of the kingdom’s crackdown on Shiite protesters calling for greater rights.

The ruling by a special security tribunal sent a strong message that Bahrain’s Sunni monarchy is not easing off on punishments linked to the unrest despite appeals for talks with Shiite groups in the strategic Gulf island nation, which is home to the U.S. Navy’s 5th Fleet.

Ayat al-Qurmezi became a minor celebrity among protesters after reciting poems critical of Bahrain’s king and prime minister during gatherings in the capital’s Pearl Square, which was the hub for Shiite-led demonstrations that broke out in February after drawing inspiration from the Arab uprisings in Tunisia and Egypt.

One verse, addressed to King Hamad bin Isa Al Khalifa, included the lines: “We are the people who will kill humiliation and assassinate misery. Don’t you hear their cries? Don’t you hear their screams?”

She was convicted of anti-state charges, including inciting hatred, said the official Bahrain News Agency. Her mother, Sada al-Qurmezi, said an appeal is planned.

The court’s decision drew sharp denunciations from opposition groups and the international rights group Amnesty International, which said the verdict highlighted how free speech is “brutally denied” by Bahrain’s authorities.

Al-Qurmezi surrendered to authorities in late March after police raided the family’s house and threatened to kill her brothers, said her mother. While in custody, the young woman claims she was beaten and tortured with electric shocks, Amnesty reported.

Shiites account for about 70 percent of Bahrain’s population but claim they face widespread discrimination such as being blocked from holding top military or government posts. Shiite leaders have called on authorities to end security crackdowns and protest-related trials before considering talks with the Sunni ruling family.

But Bahrain’s rulers appear strongly committed to keeping a heavy hand in place.

Bahrain’s monarchy and its Gulf Arab allies fear Shiite power Iran could use instability in Bahrain to gain new footholds for influence. A 1,500-strong Gulf force _ led by Iran’s main regional rival, Saudi Arabia _ helped crush the protests and is expected to remain in Bahrain indefinitely.

Al-Qurmezi was in her second year of study toward a teaching degree at the University of Bahrain when she joined the protesters in Pearl Square.

“My daughter did nothing wrong,” her mother told The Associated Press from the family home in Sadad, a village in central Bahrain. “She didn’t raise her hands in anger. She used words to express how they felt. She was only using her rights of free speech.”

Across the Arab world, poetry is a powerful and popular form of expression. Thousands of works have extolled the so-called Arab Spring, ranging from free-form verse in Cairo’s Tahrir Square to literary figures such as Syria’s Ali Esber _ better known by his pen name Adonis _ who has railed against Arab despots and last month was awarded Germany’s prestigious Goethe Prize.

“By locking up a female poet merely for expressing her views in public, Bahrain’s authorities are demonstrating how free speech and assembly are brutally denied to ordinary Bahrainis,” said Malcolm Smart, Amnesty International’s director for the Middle East and North Africa.

Her mother said al-Qurmezi also was expelled from university _ apparently caught up in government-ordered purges of thousands of students, workers and others accused of backing the protests.

At least 31 people have been killed in the unrest in Bahrain. Amnesty said at least 500 people have been detained.

“How can they do this to my daughter?” her mother asked. “Is this fair?”

Two former parliament members, Jawad Fairooz and Mattar Mattar, also went on trial Sunday as part of wide-ranging arrests and trials of perceived enemies of the ruling system. Both are members of the main Shiite political group, Wefaq, whose 18 lawmakers resigned to protest the harsh measures against protesters.

In a statement, Wefaq said the poet’s arrest is a “clear message that the government is against freedom of expression.”

It came a day after Bahrain’s government allowed a Wefaq-led rally of more than 10,000 people in an apparent bid to ease tensions and make overtures for dialogue.

The U.S. has condemned the violence in Bahrain, but has stopped short of any tangible punishments against the rulers in one of Washington’s military hubs in the Gulf.

Source