Former TBW execs get prison time for roles in fraud

Reuters, Alexandria, Virginia, June 11: Two former senior Taylor, Bean & Whitaker Mortgage Corp executives were sentenced on Friday to several years in prison for their roles in a nearly $3 billion fraud that took down the big lender and a major bank.

The fraud ran more than seven years until August 2009 when TBW collapsed after the U.S. housing market imploded, taking Colonial BancGroup Inc's (CBCDQ.PK) Colonial Bank with it and putting hundreds of people at the firm out of work.

Company and bank officials were accused of trying to cover up enormous losses by moving money between accounts at Colonial Bank and selling mortgage loans that did not exist, were worthless or already had been sold.

The Obama administration elicited guilty pleas from six senior executives. TBW's former chairman, Lee Farkas, was convicted by a jury in April on 14 counts of bank, securities and wire fraud as well as conspiracy.

"They knew that without their fraud scheme, TBW would fail," said Neil MacBride, the U.S. attorney for eastern Virginia. "They allowed Lee Farkas to control and manipulate them into doing what they knew was wrong, and now they will pay for their crimes."

It is one of the few cases in which prosecutors have been able to penetrate the executive suites of a major firm in the wake of the 2008 global financial crisis. Most prosecutions have involved lower-level employees or much smaller firms.

Desiree Brown, TBW's former treasurer, was sentenced by District Judge Leonie Brinkema to six years in prison after she tearfully acknowledged her wrongdoing. She pleaded to one count of conspiracy to commit bank, wire and securities fraud.

"It was never my intent to commit a crime," she told the court. "It was always my intent to fix the problem."

Prosecutor Patrick Stokes sought an eight-year sentence, telling the judge that Brown had "a substantial role in the fraud" and that she had been "blinded by her loyalty to Mr. Farkas."

Her attorney urged a lesser sentence, suggesting five years and noting that she was just a "country girl from Nebraska with a high school" education. She started as a receptionist before working her way up in the company.

Brinkema also sentenced TBW's former president, Raymond Bowman, to 30 months in prison. He had pleaded guilty to a conspiracy fraud charge as well as for lying to investigators when they raided the mortgage firm two years ago.

Prosecutors had sought five years in prison.

Brinkema gave lower sentences than sought by prosecutors. One prosecutor, Charles Connolly, urged the stiff penalties be imposed because "there needs to be a message sent to the Street" that the conduct was unacceptable.

However, the judge said the two were unlikely to commit crimes again, noted their cooperation and said that they were likely decent people. However, she said it was a massive fraud and the sentences would serve as a deterrent to others.

Connolly told the judge that the TBW investigation was ongoing. Farkas is due to be sentenced on June 27.

Before its collapse, TBW was one of the country's largest privately-held mortgage lenders, doing some $20 billion in mortgage sales a year, and Colonial Bank was one of the top 50 U.S. banks before regulators took it over.

Authorities have estimated the fraud at nearly $3 billion. The executives were also accused of misappropriating money from one of its own funding mechanisms which had two big investors, Deutsche Bank AG (DBKGn.DE) and BNP Paribas SA (BNPP.PA).

As losses mounted at TBW, the firm tried to drum up capital to help Colonial Bank win $553 million in funding from the federal bank bailout program known as the Troubled Asset Relief Program, prosecutors said. No money was disbursed.

The cases are: USA v. Bowman, No. 11-cr-118 and USA v. Brown, No. 11-cr-84 in U.S. District Court for the Eastern District of Virginia.

Borders staves off closing of six bookstores

Reuters, NEW YORK, June 11: Bankrupt Borders Group Inc (BGPIQ.PK) reached agreements to avoid shuttering six of its stores that the bookseller planned to close under the terms of its bankruptcy loan.

Landlords for stores in Boston and Detroit are among those who agreed to give the insolvent bookstore chain more time to decide whether to break or maintain leases on its properties, Borders said in court papers filed Friday in U.S. Bankruptcy Court in Manhattan,

Borders told the court on Thursday that it might need to close 51 stores under the terms of a $505 million bankruptcy financing loan from General Electric Co's (GE.N) GE Capital.

The latest extensions lower that number to 45 stores. The company is working to reach similar extensions with as many of the remaining stores as possible, a Borders spokeswoman said.

The salvaged locations include Boston's Logan International Airport, Raleigh-Durham Airport, two locations in Detroit Metro Airport and stores in Westland, Michigan, and Mansfield, Connecticut. The company is also awaiting court approval of an agreed-upon extension for its Mt. Kisco, New York store, according to court documents.

Borders had until September 14 to decide whether to keep open more than 400 stores nationwide. Under the terms of its loan, the company either had to extend that deadline or start closing procedures by June 22.

It reached earlier extensions on about 360 stores. The latest agreements push the deadline to January 12, 2012.

Borders plans a June 16 auction to find a liquidation agent for closing sales at stores where extensions are not reached. Manhattan's Columbus Circle store is one of the locations that still might close.

Borders, which helped pioneer the concept of book superstores, fell into bankruptcy in February after years of falling sales, and it has closed 226 stores.

The company is trying to find buyers for as many of its remaining stores as possible, and has drawn interest from private equity firms Gores Group and Najafi Cos, according to the Wall Street Journal.

The case is In re Borders Group Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-10614.

Import prices rise for 8th straight month

Reuters, WASHINGTON, June 11: Import prices rose for an eighth straight month in May despite a drop in fuel costs, with the year-on-year increase reaching its highest level in nearly three years, according to data on Friday.

The Labor Department said import prices climbed 0.2 percent last month, confounding forecasts for a 0.7 percent decline and following April's revised 2.1 percent jump. In the year to May, import prices surged 12.5 percent, the largest gain since September 2008.

"This is simply reflecting the increase in import petroleum prices," said Anthony Karydakis, senior U.S. economist at Commerzbank AG. "Excluding petroleum, import prices have been very subdued."

The trend of higher energy prices was already being reversed with petroleum import prices falling 0.4 percent in May, the first decline since September 2010.

Overall export prices rose 0.2 percent after a downwardly revised 0.9 percent gain. Analysts had been looking for a 0.3 percent gain.

The data hinted at ongoing price pressures from overseas, but also suggested the recent decline in oil and commodity prices will soon translate into some relief for businesses in the form of lower costs.

Officials at the U.S. Federal Reserve, most recently New York Federal Reserve president William Dudley on Friday, have argued that the rapid rise in energy prices seen earlier in the year would be transitory, and therefore should not prove inflationary over the medium term.

Until late last year, policymakers had been concerned about the prospect of deflation, a damaging downward spiral in prices and wages. But since the launch of the Fed's $600 billion bond-buying program, overall inflation has firmed significantly.

U.S. consumer prices rose 3.2 percent in the year to April. But outside food and energy, the CPI climbed just 1.3 percent, below the central bank's presumed target of 2 percent or a bit below.

Last month's easing in fuel costs is expected to have helped temper U.S. inflation. A government report due on Wednesday is expected to show consumer prices rose a slim 0.1 percent in May. Outside food and energy, prices are seen up a still-mild 0.2 percent.

The year-on-year gain in overall inflation is expected to tick up to 3.3 percent, with the core price increase rising to 1.4 percent.

Lawyers cry foul as Khodorkovsky sent to secret jail

Reuters, MOSCOW, June 11: Jailed former oil tycoon Mikhail Khodorkovsky was transferred from Moscow to a prison camp in an undisclosed location, his lawyers said on Friday, decrying the move as an attempt to block his parole hearing.

Once Russia's richest man, Khodorkovsky was jailed in 2003 after falling foul of the Kremlin under then President Vladimir Putin. He is serving a 13-year sentence and is due to be released in 2016.

Khodorkovsky's defense team, who claim he is a political prisoner, said he filed again for parole on Tuesday after a Moscow court refused to hear a first request on the grounds that he did not supply the proper documents.

Lawyer Vadim Klyuvgant said the transfer was aimed "at creating an artificial delay of the hearing of our client's application for parole."

He claimed it would be easier for the authorities to reject his request for early release if the review was held far from Moscow and from journalists who could spotlight violations.

"It is clear that they are trying to prevent hearing the petition for parole in Moscow since there are no legitimate grounds for a denial," he said in a statement on his client's website.

Khodorkovsky's lawyers said both they and his wife were earlier denied a meeting with the jailed former head of oil major Yukos on the grounds he was being readied for the journey.

The European Court of Human Rights ruled last week that Russia violated Khodorkovsky's rights during his 2003 arrest and jailing on charges of fraud and tax evasion and ordered Moscow to pay him 24,500 euros ($35,300), though it found no firm proof the case was politically motivated.

Ahead of a second trial against him, Khodorkovsky was transferred in February 2009 to a Moscow jail from a Siberian prison camp outside Chita, where he was serving his first sentence.

It was unclear Friday whether he was sent back to Chita or another detention facility.

Itar-tass state news agency cited a law enforcement source confirming that Khodorkovsky had been transferred and said relatives would be informed of his new location within 10 days.

Moscow court and prison authorities could not immediately reached for comment by Reuters.

Khordorkovsky built a fortune by buying state assets cheaply after the collapse of the Soviet Union in 1991, but his business empire, which produced more oil than OPEC member Qatar, was split up and sold after his arrest in 2003.

He has said repeatedly that his convictions for fraud, theft and money laundering were ordered by senior officials who wanted to carve up his oil company and take revenge for a perceived challenge to Putin's authority.

Russian state-controlled oil firm Rosneft eventually bought the largest production assets, including Yuganskneftegaz, making Rosneft Russia's biggest oil producer.

Khodorkovsky and his business partner Platon Lebedev were sentenced to stay in jail until 2017 in a second trial in December, but the sentence was reduced by one year on appeal.

President Dmitry Medvedev said last month it would not be dangerous to release Khodorkovsky, but Prime Minister Putin has taken a tougher stance, comparing the former tycoon to American gangster Al Capone.

Deficit cut would trim growth: BlackRock's Fink

Reuters, CHICAGO, June 11: A $4 trillion reduction of the U.S. budget deficit, if enacted by Congress, would trim economic growth by one percentage point a year for the next decade, BlackRock (BLK.N) Chief Executive Laurence Fink said.

With analysts already forecasting modest growth of 2 percent to 3 percent annually, that would leave the United States with an economy expanding at only about 1 percent a year, Fink said at the Morningstar investment conference on Friday.

Still, such deficit reduction is critically needed, Fink said. "I don't think we have a choice," Fink said. "We've lived way beyond our means."

As a result, the government needs to work more closely with the private sector to bolster the economy, said Fink, who heads the world's largest money management firm.

He recommended raising tax rates on dividends so they are above those for capital gains and altering mark-to-market accounting standards that do not apply equally to corporate assets and liabilities.

Cutting corporate tax rates would encourage job growth from small businesses and multinationals, creating more jobs in the United States, he added.

Without significant deficit reduction, the United States budget is at great risk from even a small rise in interest rates, which could send debt service costs skyrocketing, Fink said. A 1 percent increase in rates would cost the government $140 billion in higher debt payments, he said.

For 2011, BlackRock has lowered its economic growth expectations, Fink said. The company expects the U.S. economy to expand 2 percent to 2.5 percent this year, not the 2 percent to 3 percent forecast six months ago. "We may even see 1.75 percent," he said. "The economy has weakened."

Fink said he is not "bearish" on the bond market, though rates could rise slightly from current levels.

In general, long-term investors should favor a globally diversified portfolio of stocks over bonds in today's market, Fink said.

"Equities are a better long-term investment than bonds at these prices," he said. But investors do not own enough stocks because of lingering fears from the past decade, Fink said. Equities are "the most underinvested asset class in the world."

While some analysts have forecast huge problems for municipal securities, Fink said the market will be "fine and solid" with only smaller, more obscure issuers running into financial difficulties.

Toyota owners set back in U.S. lawsuit over losses

Reuters, NEW YORK, June 11: A federal judge said Toyota owners outside California who seek to recover losses in their vehicles' value resulting from unintended acceleration cannot pursue their claims under that state's laws.

Wednesday's ruling by U.S. District Judge James Selna is a setback for the owners, because California consumer protection laws would give them a better chance than most states' laws to recover on their "economic loss" claims.

Toyota Motor Corp (7203.T) has said roughly 70 percent of the economic loss claims were originally filed in states other than California.

Selna, who sits in Santa Ana, California, said applying California law would revive many claims that other U.S. states would not permit, violating principles set forth by the U.S. Supreme Court on which law to apply.

"Application of California law to a nationwide class, at least in some instances, would drastically expand the scope of relief available to plaintiffs (to the detriment of Toyota)," Selna wrote.

A lawyer for the plaintiffs did not immediately return call a seeking comment. Toyota in a statement said it is pleased the court decided not to allow "a few handpicked plaintiffs" to set the course of litigation through "procedural engineering."

Toyota owners have argued that their vehicles lost value because the company failed to disclose and fix problems with electronic throttle control systems, causing the vehicles to surge forward unexpectedly.

The Japanese automaker has disputed this claim, and has said it expects to prevail in the litigation. Selna handles most of the resulting federal lawsuits.

Toyota has since late 2009 recalled several million vehicles for problems, including stuck gas pedals and floor mat flaws, that owners have linked to unintended acceleration.

The case is In re: Toyota Motor Corp Unintended Acceleration Marketing, Sales Practices and Products Liability Litigation, U.S. District Court, Central District of California, No. 10-ml-02151.

Bangladesh National Budget 2011-2012

Bangladesh finance minister AMA Muhith placed the National Budget 2011-2012 to the Parliament on June 9, 2011.

Budget Speech - English
Budget Speech - Bangla

Budget in Brief - English
Budget in Brief - Bangla