Obama Relies on Debt Collectors Profiting From Student Loan Woe

By John Hechinger - Mar 26, 2012 11:01 AM GMT+0700

The debt collector on the other end of the phone gave Oswaldo Campos an ultimatum:

Pay $219 a month toward his more than $20,000 in defaulted student loans, or Pioneer Credit Recovery, a contractor with the U.S. Education Department, would confiscate his pay. Campos, disabled from liver disease, makes about $20,000 a year.

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A debt collector for the U.S. Education Department insisted that Oswaldo Campos pay $219 a month on his more than $20,000 in student loans -- even though he was entitled to pay less under federal student-loan rules. Photographer: Kelvin Ma/Bloomberg

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Campos holds a letter from the U.S. Department of Education confirming that he is considered disabled. He contracted liver disease from a blood transfusion. Photographer: Kelvin Ma Photographer: Kelvin Ma/Bloomberg

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Oswaldo Campos's handicapped parking tag. Photographer: Kelvin Ma/Bloomberg

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Oswaldo Campos's medications on the counter of the kitchen in his Boston apartment. Photographer: Kelvin Ma/Bloomberg

“We’re not playing here,” Campos recalled the collector telling him in December. “You’re dealing with the federal government. You have no other options.”

Campos agreed to have the money deducted each month from his bank account, even though federal student-loan rules would let him pay less and become eligible for a plan -- approved by Congress and touted by President Barack Obama -- requiring him to lay out about $50 a month. To satisfy Pioneer, Campos borrowed from friends, cut meat from his diet and stopped buying gas to drive his 82-year-old mother to doctor’s visits for her Parkinson’s Disease.

With $67 billion of student loans in default, the Education Department is turning to an army of private debt-collection companies to put the squeeze on borrowers. Working on commissions that totaled about $1 billion last year, these government contractors face growing complaints that they are violating federal laws by insisting on stiff payments, even when borrowers’ incomes make them eligible for leniency.

‘Boiler Room’

Education Department contracts -- featuring commissions of as much as 20 percent of recoveries -- encourage collectors to insist on high payments. Former debt collectors said they worked in a “boiler-room” environment, where they could earn bonuses of thousands of dollars a month, restaurant gift cards and even trips to foreign resorts if they collected enough from borrowers.

In failing health, after contracting hepatitis from a blood transfusion, Campos pleaded with Pioneer, owned by SLM Corp. (SLM), the nation’s largest student-loan company better known as Sallie Mae. He left a $40,000-a-year job at the Massachusetts health department when he got too sick to work and waited for a liver transplant. The 52-year-old former busboy, a naturalized U.S. citizen from El Salvador, earned bachelor’s and master’s degrees in the 1990s from Cambridge College in Massachusetts.

“I know I owe this money and I want to pay it back -- I just can’t,” Campos said, his eyes filled with tears, during an interview at the Boston social-services agency where he works six hours a week leading court-ordered classes for drunk drivers.

181,000 Complaints

Debt collectors are the subject of more complaints to the Federal Trade Commission than any other industry -- almost 181,000 last year. Within the past 17 months, three companies working for the Education Department -- including one that is majority owned by JPMorgan Chase & Co. (JPM)’s private-equity arm -- settled federal or state allegations of abusive debt collections. The companies didn’t acknowledge wrongdoing, and Chase declined to comment. The Education Department said the government investigations didn’t involve the companies’ work for the agency.

The U.S. Consumer Financial Protection Bureau, created in 2010 in the wake of the credit crisis, has proposed supervising the largest debt collectors to ensure they are complying with laws such as the Fair Debt Collection Practices Act. About 5 million federal education-loan borrowers are in default, generally meaning they have failed to make payments for 270 days or more.

“With student-loan defaults rising, we want to make sure borrowers clearly understand their loan-repayment options and debt collectors are following the law,” Rohit Chopra, the agency’s student-loan ombudsman, said in an e-mail.

‘Reasonable and Affordable’

Federal-aid law requires collectors to offer “reasonable and affordable” payments, so debtors can “rehabilitate” their loans, repairing their credit and making good on what they owe taxpayers.

The law mandates no minimum payment for a borrower to enter a rehabilitation program, and collection companies may take borrowers’ finances into account. The fair debt act forbids collectors from making “any false, deceptive or misleading representation.”

Insisting that cash-strapped borrowers make minimum payments and then failing to disclose lower-cost options violates both federal-aid and fair debt-collection laws, according to Deanne Loonin, an attorney with the Boston-based National Consumer Law Center.

Debt collectors said they follow federal laws and use all available tools to recover money for taxpayers. The companies are helping to make sure that future college students have access to financial aid, said Mark Schiffman, spokesman for ACA International, a Minneapolis-based industry trade association.

$1 Billion Commissions

Debt-collection companies helped the Education Department recover $11.3 billion in defaulted loans during the year ended Sept. 30. The agency projects it will collect 85 cents on every dollar that defaults, factoring in collection costs and the time-value of money.

The debt collectors made out well, too. Based on a review of government contracts and Education Department data, the private companies -- working directly for the government and through state agencies -- received commissions of about $1 billion in the year through September.

Sallie Mae and the Education Department declined to answer questions about Campos’s comments. The company cited privacy rules and the terms of its government contracts. Newark, Delaware-based Sallie Mae said it works with borrowers in financial difficulty and offers lower payments when appropriate.

“We have helped thousands of student-loan customers in default get back on track to fulfill their obligations, giving consumers the opportunity to improve their credit and providing cost savings for the American taxpayer,” Patricia Nash Christel, a Sallie Mae spokeswoman, said in an e-mail.

New Rules?

The Education Department this week will hold meetings with industry, government and consumer representatives to consider requiring that debt collectors automatically offer payments based on income to defaulted borrowers who qualify. If approved, the rules could take effect in July 2013.

“We want to make sure we are striking the right balance between helping borrowers who have hit hard times and honoring our responsibility to be good stewards of taxpayer dollars,” Justin Hamilton, an Education Department spokesman, said in a phone interview.

To protect customers, the department randomly monitors tape recordings of student-loan debt-collection calls, Hamilton said. The department is also considering changing the commission structure in its debt-collection contracts, he said.

The agency encourages students to file reports if they feel mistreated, Hamilton said. In the year ended in September, the department received 1,406 complaints against the debt collectors it hires, up 41 percent from the year before.

Collectors’ Power

Under U.S. law, student loans can rarely be discharged, even in bankruptcy, making them more difficult to shake than credit cards or past-due mortgages. The government can also confiscate tax refunds and Social Security payments, as well as paychecks.

“Student-loan debt collectors have power that would make a mobster envious,” Harvard Law Professor Elizabeth Warren, who helped establish the Consumer Financial Protection Bureau and is now running for a U.S. Senate seat from Massachusetts, said in 2005.

Under Education Department contracts, collection companies “rehabilitate” a defaulted loan by getting a borrower to make nine payments in 10 months. If they succeed, they reap a jackpot: a commission equal to as much as 16 percent of the entire loan amount, or $3,200 on a $20,000 loan.

Incentive Pressure

These companies receive that fee only if borrowers make a minimum payment of 0.75 percent to 1.25 percent of the loan each month, depending on its size. For example, a $20,000 loan would require payments of about $200 a month. If the payment falls below that figure, the collector receives an administrative fee of $150.

That differential provides an incentive for collectors to insist on the minimum payment and fail to reveal when borrowers are eligible for a more affordable schedule, according to Loonin, the attorney at the National Consumer Law Center, which is representing borrowers in the Washington talks with the Education Department

Customers benefit from successfully rehabilitating a loan, because they repair their credit, and the government removes thousands of dollars in fees and collection costs, the Education Department and Sallie Mae said. Taxpayers, rather than borrowers, pay the rehabilitation commission, according to the agency. Students who immediately sign up for income-based plans, through a program called consolidation, don’t get those benefits, Sallie Mae and the Education Department said.

Automatic Dialers

Debt collectors are under pressure to extract as much money as they can up front, or lose their jobs, said J.C. Cournan, who worked for Pioneer Credit Recovery from 2004 through 2007.

Collectors, then paid about minimum wage, could earn thousands of dollars a month in bonuses, based on the money that borrowers repaid, said Cournan, who took the upstate New York job out of high school. Pioneer set monthly goals for wage garnishments and loan rehabilitations, he said.

Using automatic dialers to track down borrowers, Cournan would figure out where they worked, then contact their employers. He would tell borrowers that he was going to seize part of their wages if they didn’t make the payments. Using a company loan calculator, Cournan would insist on the minimum payment, he said.

“When wou’re making 8 bucks an hour, it’s all about the bonuses. You’re starving,” said Cournan, 26, now an auto mechanic.

Gift Cards, TVs

Pioneer maintained a “boiler room” environment, with high turnover among those who didn’t perform, said Joshua Kehoe, a former collector. Kehoe worked in Batavia, New York, from July 2006 through October 2008 after managing a pizza stand at a theme park.

Pioneer rewarded collectors with $100 restaurant gift cards, a $500 mahogany jewelry box, televisions and a trip to the Dominican Republic, according to Kehoe, who said he earned $9.60 an hour before the incentives.

It would be “a cold day in Hades” before collectors would tell borrowers about options with lower payments, according to Kehoe, who said “rehab cash was king.” The company pushed collectors to sign borrowers up for the rehabilitation plans, which often required payments equal to 1.25 percent of their loan amount monthly, he said.

Heavy Heart

“It was hard on my mind -- it was hard on my heart,” said Kehoe, 25, who now works as a welder in Akron, New York. “There was the guy with one leg or the single mom with five children.”

Under pressure to meet collection goals, Kehoe falsified documents for verifying the employment of borrowers who were subject to wage garnishment, he said. Pioneer discovered the violation and dismissed him, Kehoe said.

Sallie Mae declined to discuss the former employees’ comments. The company uses a mix of hourly pay “substantially above minimum wage” and performance-based incentives, said Sallie Mae’s Christel.

Like other debt collectors, “we design a compensation system that pays for good performance,” Christel said. “We take compliance seriously and design our policies and practices to meet all applicable fair debt collections laws and federal government service contract requirements.”

The Internal Revenue Service in 2009 stopped using private debt collectors, saying its own employees were more cost effective and flexible for taxpayers facing economic hardship.

‘IRS Was Better’

The IRS let Campos, the Boston student-loan debtor, set up a payment plan he could afford when he fell behind on his taxes, he said.

“The IRS was better,” Campos said. “They bent over backwards to help you.”

The Education Department will “definitely want to take a look” at IRS collections to see “what their experience has been,” Hamilton, the Education Department spokesman, said.

Twenty-three collection companies work directly for the Education Department. Most of the same outfits have contracts with state guarantee agencies that also chase student-loan borrowers on the government’s behalf.

In the past 17 months, three companies have run afoul of federal and state investigators, though the Education Department said their inquiries didn’t involve their government student- loan business.

Wrong Numbers

During this period, Minneapolis-based Allied Interstate Inc. and Atlanta-based West Asset Management Inc. paid $1.75 million and $2.8 million, respectively, to settle lawsuits alleging abusive debt collection filed by the Federal Trade Commission. The companies admitted no wrongdoing. In February, to resolve an investigation by 19 state attorneys general, NCO Group, majority-owned by JPMorgan Chase, agreed to pay $575,000 and provide up to $50,000 per state for consumers who can show wrongful collections. The companies admitted no wrongdoing.

Allied has taken steps to correct mistakes -- primarily repeated phone calls to wrong numbers -- and complaints have fallen, Robert Burke, vice president for marketing of iQor Inc., the company’s parent, said in an e-mail.

West disagreed with the FTC’s findings, Deputy General Counsel Greg Hogenmiller said in an e-mail. Consumers haven’t made claims to NCO since the attorneys general settlement, and no wrongdoing was found, Ronald Rittenmeyer, chief executive officer of Horsham, Pennsylvania-based NCO, said in an e-mail.

Defaults Surge

The collection business is booming as defaults more than doubled since 2003, along with outstanding federal student loans, which totaled $848 billion as of Sept. 30, surpassing credit-card debt.

The U.S. loan program was born in 1965 as a “Great Society” initiative for lower-income students under President Lyndon Johnson. Today, with tuition soaring, two-thirds of college seniors graduate with loans, which average $25,000, according to the Institute for College Access & Success, an Oakland, California, nonprofit education and advocacy group.

Obama -- supported by Congress -- has pledged to give borrowers a break and make college more affordable.

In 2009, Congress expanded a program that lets lower-income students tie payments to their incomes. It’s a sliding scale, based on their debt, salaries and family obligations. Married borrowers with two children, $30,000 in income and $30,000 in student loans wouldn’t have to make any payments, according to a government loan calculator. If circumstances don’t improve, the loans can be canceled after 25 years.

In October, Obama proposed making payments even lower and forgiving loans after two decades for some borrowers, as soon as this year.

Disabled Mom

Kimberly Noland could have used that kind of help.

Noland, 44, lives in Fayetteville, Arkansas, with her husband, a laid-off factory worker now employed at a Wal-Mart store, and their seven-year-old daughter.

Noland injured her leg while working in a day-care center. She started collecting $828 a month in Social Security disability payments in 2010.

Shortly after she qualified, Collection Technology Inc., an Education Department debt collector, called about Noland’s roughly $30,000 in defaulted student loans from attending the University of Arkansas.

A collector told her she had to pay $325 a month, almost as much as her rent, Noland said in a phone interview. She couldn’t afford it on her family’s $20,000 annual income, she said.

“I have a child,” Noland remembered telling the collector. “I can’t give you every bit of money in my house.”

‘Final Number’

“This is our final number,” the collector replied, saying her boss wanted even more, according to Noland. The phone conversation lasted more than an hour, she said. She was given three days to decide, or Collection Technology would seize part of her disability check “forever,” and she would never have another chance to rehabilitate her loan, Noland said.

She bought a prepaid debit card at Wal-Mart, authorizing Collection Technology to make the $325 monthly withdrawals. She visited churches to collect free bread and canned goods.

“I didn’t know why it had to be such a high dollar amount,” Noland said. “They have the power, I guess. You do what you have to do to make them happy.”

Chris Van Dellen, CEO of Collection Technology in Monterey Park, California, referred questions about Noland’s comments to the Education Department, which declined to discuss her case.

In October, Noland and her husband filed for bankruptcy. Last year, she qualified for the Education Department’s income- based plan. Her monthly student-loan payment: zero.

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

To contact the editor responsible for this story: Lisa Wolfson at lwolfson@bloomberg.net;

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JetBlue Captain Shut Out of Cockpit by Co-Pilot on Behavior

By Mary Schlangenstein and Alan Levin - Mar 28, 2012 5:59 AM GMT+0700

A JetBlue Airways Corp. (JBLU) captain began acting erratically during a flight from New York today and was locked out of the cockpit by his co-pilot before the plane was diverted to Texas, federal officials said.

The captain had to be subdued by passengers when he tried to re-enter the cockpit after briefly stepping out, the Federal Aviation Administration said in an e-mailed statement. The Las Vegas-bound jet landed in Amarillo, Texas, where the captain was taken to a hospital for evaluation, the FAA said.

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Passengers on a JetBlue flight. Photographer: Robert Nickelsberg/Getty Images

“The co-pilot became concerned that the captain exhibited erratic behavior during the flight,” the FAA said. Law enforcement officials “secured the pilot without incident” after landing.

Flight 191 was about halfway into a journey of roughly 2,250 miles (3,620 kilometers) when the incident occurred, based on an e-mailed statement from Allison Steinberg, a JetBlue spokeswoman. An off-duty pilot entered the cockpit and assisted the co-pilot as the twin-engine Airbus SAS A320 touched down safely with 135 passengers and five on-duty crew members.

“I can’t think of another time in my 26-year airline career where I’ve ever heard of something like this happening,” Lee Collins, executive vice president of the Coalition of Airline Pilots Associations trade group in Washington, said in a phone interview. JetBlue pilots aren’t unionized.

‘Screaming, Pounding’

Laurie Dhue, a former Fox News employee who was on the flight, told Fox’s Shepard Smith in an interview that the captain had a “breakdown of some kind.”

“He was running down the aisle screaming, pounding on the cockpit door, saying ‘Let me in, let me in, pull the throttle back, we got to get this plane down,’” Dhue said. “Several huge men who happened to be sitting in front of the plane rushed down the aisle, wrestled him to the ground and got him subdued pretty darn quick.”

The FAA, Federal Bureau of Investigation, Transportation Security Administration and local law enforcement authorities are investigating, according to the FAA statement.

Steinberg said JetBlue wasn’t identifying any of its employees on the jet. The airline sent another plane to collect the travelers and continue the flight to Las Vegas, she said.

New York Departure

Flight 191 left New York’s John F. Kennedy International Airport at 7:28 a.m., more than a half-hour after its scheduled departure. It landed about 10:11 a.m. local time at Amarillo’s Rick Husband International Airport, about 11 minutes after the co-pilot decided to divert there, Steinberg said.

The patient from the airport incident was at Northwest Texas Healthcare System, said Caytie Martin, a spokeswoman for the Amarillo hospital, who declined to comment further.

FAA rules require that airline pilots receive a medical check once a year if under 40 and every six months if older, according to the agency’s website. The exam includes questions about mental health, according to the agency.

Today’s incident was the second flight in less than a month disrupted by an employee at a U.S. airline.

An American Airlines (AMR1) plane had to return to an airport gate on March 9 after a flight attendant began ranting about a possible crash and the Sept. 11 terrorist attacks. She initially was restrained by passengers and later was handcuffed and put in leg restraints by officers when she resisted being taken off the plane at Dallas-Fort Worth International Airport.

The woman, 43, who was taken to a hospital for evaluation of a “mental episode,” had stopped taking medication for bipolar disorder, according to an airport police report. A second flight attendant was injured in the incident.

To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Alan Levin in Washington at alevin24@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Bernard Kohn at bkohn2@bloomberg.net

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Nokia to Sell $99.99 Windows Phone Via AT&T to Take On Apple

By Scott Moritz - Mar 27, 2012 3:55 AM GMT+0700

AT&T Inc. (T) plans to start selling a Nokia Oyj smartphone with Microsoft Corp. (MSFT) software for half of what it charges for the iPhone, as the device’s makers seek to break Apple Inc. (AAPL) and Google Inc. (GOOG)’s dominance of the U.S. market.

The Lumia 900, which runs on AT&T’s network using faster, so-called long-term-evolution technology, will start selling for $99.99 on April 8, the second-largest U.S. wireless carrier said today in a statement. The latest iPhone and newest handsets running Google’s Android software typically start at $199.

Nokia is counting on Microsoft’s Windows Phone software to reignite sales in the U.S., where the iPhone, Android makers such as Samsung Electronics Co. (005930) and Research In Motion Ltd. (RIM)’s BlackBerry control 92 percent of the market. Microsoft is trying to increase its share of the mobile software market to expand beyond the slower-growing personal-computer market.

“The pricing is aggressive,” said Avi Greengart, an analyst at research firm Current Analysis in Teaneck, New Jersey. “They are hoping to use price to get people to buy a product with an operating system they aren’t familiar with.”

To get the $99.99 price, customers need to sign up to a two-year contract with AT&T. The Dallas-based carrier will also sell the phone without a contract for $449.99, said Steven Schwadron, an AT&T spokesman.

Those price points suggest that AT&T is subsidizing each Lumia by about $350. That compares with a $450 subsidy for the the cheapest version iPhone 4S, which sells for $199 with a contract and $649 without one.

Must Win

Nokia Chief Executive Officer Stephen Elop, a former Microsoft executive, started rebuilding the Espoo, Finland-based company’s smartphone strategy around the Windows Phone operating system last year. Nokia had previously focused on its own MeeGo and Symbian operating systems.

Nokia and Microsoft have said they are willing to spend money to fuel sales. Microsoft said last year it would pay Nokia $1 billion to develop and promote Windows phones. Elop said in October that marketing spending on the Lumia series would be triple the money spent on previous product sales promotions.

Microsoft, based in Redmond, Washington, rose 1.8 percent to $32.59 at the close in New York. Nokia advanced 0.4 percent at 3.99 euros in Helsinki. AT&T added 0.9 percent to $31.79.

The Lumia 900 has a 4.3-inch (11-centimeter) screen, larger than that of the iPhone, and an 8-megapixel camera. Customers can order it online starting March 30, AT&T said.

To contact the reporter on this story: Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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Green Mountain Founder Sold Stock Before Starbucks Threat

By Max Abelson and Leslie Patton - Mar 27, 2012 4:08 AM GMT+0700

Robert P. Stiller, founder and chairman of Green Mountain Coffee Roasters Inc. (GMCR), sold $66.3 million of his stock before it plunged the most in four months on news that Starbucks Corp. (SBUX) had developed a rival to its K-Cup brewer.

Stiller’s combined sales on Feb. 15 and 24 were his largest in a single month since at least 2003, when the stock traded below $2, data compiled by Bloomberg show. He would have received $13.7 million less had he sold after March 9, when the shares fell 16 percent on Starbucks’ introduction of a machine for home-brewing single cups of espresso and coffee, a challenge to Green Mountain’s Keurig system.

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Green Mountain Coffee K-Cups at the company's visitor center and cafe in Waterbury, Vermont on Feb. 18, 2011. Photographer: Herb Swanson/Bloomberg

“We recently learned of Starbucks’ planned initiative in the espresso-based single-cup category,” Green Mountain said in a March 9 regulatory filing, a day after the machine was announced. “However, we were not made aware of any additional capabilities.” Spokesmen for Green Mountain wouldn’t specify when it learned of the plan.

Green Mountain is struggling to hold market share as it braces for the September expiration of its main patents on K- Cups. The plastic pods have dominated single-serve coffee making in the U.S., with flavors including Gloria Jean’s Butter Toffee Coffee and Wolfgang Puck’s Jamaica Me Crazy blends. As other companies prepare their own machines, the Waterbury, Vermont- based brewer’s stock has almost halved to $53.51 in the six months through last week.

The shares dropped 2 percent to $52.45 at 4:30 p.m. in New York, after reaching as high as $54.75 during the session.

Must Abstain

“It’s something that the SEC would want to look at,” said James D. Cox, a securities law professor at Duke University in Durham, North Carolina. “If he has inside information, he has to withdraw from the market.” Florence Harmon, a Securities and Exchange Commission spokeswoman, declined to comment.

Starbucks informed Green Mountain of its plans before its announcement, according to Alisa Martinez, a spokeswoman for the Seattle-based company. She wouldn’t elaborate. Darren Brandt, a spokesman for Green Mountain, declined to comment on behalf of the company and Stiller.

Stiller reduced his direct stake last month by 6.9 percent, selling a total of 1 million shares, according to regulatory filings with the SEC. The sales aren’t marked as so-called 10b5- 1 transactions, a type of pre-programmed trade that managers set up in advance to show they aren’t basing decisions on inside information. Starbucks’ March 8 announcement after the close of trading sent Green Mountain’s stock down the next day. By the end of last week, it had regained 1.8 percent.

Stiller’s Background

Stiller, the second-biggest shareholder of Krispy Kreme Doughnuts Inc. (KKD) and the largest stakeholder of pizza chain Noble Romans Inc. (NROM), also co-founded the rolling paper maker E-Z Wider. He founded Green Mountain in 1981 as a small Vermont cafe and remains the largest individual shareholder with 13.4 million shares, or 8.7 percent of the company, according to Bloomberg data. Stiller was listed as 68 in a February proxy statement.

The company has faced criticism from hedge-fund manager David Einhorn, who in October questioned its accounting and said its market share has peaked.

“With Green Mountain’s patents expiring this fall, Starbucks’ entry is part of the competitive onslaught hitting Green Mountain,” said Einhorn, 43, president of New York-based Greenlight Capital Inc., in an e-mail earlier this month.

Stiller submitted paperwork dated Aug. 4 to the SEC showing he wanted to sell as much as 2 million shares. He sold only 500,000 that day, a separate filing shows.

Rival Machines

Even if those documents showed intent to further reduce his stake, the February trades would be “problematic” if he had information from Starbucks about its plans, said Onnig Dombalagian, a professor at Tulane University Law School in New Orleans and former fellow at the SEC.

Green Mountain says its K-Cup system and a new brewer, called Vue, are different from the new Starbucks machine, called Verismo. Green Mountain’s machines use “low pressure to extract maximum flavor,” as opposed to espresso machines using “high pressure and high temperature to produce a more intense taste profile,” according to its March 9 statement.

Starbucks had an existing agreement to sell coffee for Green Mountain’s K-Cup system before introducing the Verismo. On March 21, the companies said Starbucks will also sell cups that work with the Vue. Green Mountain jumped 10 percent on that announcement.

Stiller’s trades probably aren’t the most important of the “smorgasbord of cases” the SEC could be interested in, Boston University School of Law professor Tamar Frankel said. The commission’s resources “are not unlimited -- far from it.”

To contact the reporters on this story: Max Abelson in New York at mabelson@bloomberg.net; Leslie Patton in Chicago at lpatton5@bloomberg.net.

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Robin Ajello at rajello@bloomberg.net.

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U.S. Stocks Advance Following Bernanke’s Comments

By Rita Nazareth - Mar 27, 2012 3:45 AM GMT+0700

U.S. stocks advanced, sending the Standard & Poor’s 500 Index to the highest level since May 2008, after Federal Reserve Chairman Ben S. Bernanke said that accommodative monetary policy is still needed to spur jobs.

The Morgan Stanley Cyclical Index of companies most-tied to the economy rose 1.3 percent. Apple Inc. (AAPL) jumped 1.8 percent to a record as the world’s most-valuable technology company said it plans to increase investment in China. Amazon.com Inc. (AMZN) and JPMorgan Chase & Co. (JPM) climbed at least 2.2 percent to pace gains among the largest companies. Pfizer Inc. (PFE) added 1.6 percent as health-care shares rose the most among 10 S&P 500 groups.

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Specialist Paul Cosentino, right, directs trading in shares on the floor of the New York Stock Exchange. Photographer: Richard Drew/AP Photo

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March 26 (Bloomberg) -- Bloomberg's Carol Massar reports on the performance of the U.S. equity market today. The Standard & Poor's 500 Index rallied 1.4 percent to close at 1,416.51 at 4 p.m. New York time, returning to its highest level in almost four years. (Source: Bloomberg)

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March 26 (Bloomberg) -- Michael Gayed, chief investment strategist at Pension Partners LLC, and Matthew McCormick, vice president and portfolio manager at Bahl & Gaynor Inc., talk about investing and the U.S. stock market. They speak with Trish Regan, Adam Johnson on Bloomberg Television's "Street Smart." Peter Kiernan, chief executive officer of Kiernan Ventures, also speaks. (Source: Bloomberg)

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March 26 (Bloomberg) -- Fed Chief Ben Bernanke says accommodative policy is needed to cut the unemployment rate. Bloomberg's Betty Liu speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

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March 26 (Bloomberg) -- Federal Reserve Chairman Ben Bernanke said while he’s encouraged by the unemployment rate’s decline to 8.3 percent, continued accommodative monetary policy will be needed to make further progress. Bloomberg's Mike McKee reports that Bernanke's view is not held by all on the Federal Reserve. He speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

Audio Download: Blackrock’s Doll Cold on Treasuries, Warm on Stocks

The S&P 500 advanced 1.4 percent to 1,416.51 at 4 p.m. New York time, erasing last week’s loss and posting the fourth- biggest gain of 2012. The Dow Jones Industrial Average added 160.90 points, or 1.2 percent, to 13,241.63 today. The Russell 2000 Index (RTY) of small companies rallied 1.9 percent to 846.13, the highest level since July. About 6.2 billion shares changed hands on U.S. exchanges, or 6 percent below the three-month average.

“Bernanke is in a difficult situation because the Federal Reserve is mostly relying on the Fed’s speech as opposed to money to move markets,” said David Kelly, who helps oversee about $394 billion as chief market strategist at JPMorgan Funds in New York. “What he’s trying to say is that they’re going to be pretty slow to remove stimulus.”

Equities rose as Bernanke said in a speech that while he’s encouraged by the unemployment rate’s decline, the economy still needs help. The number of Americans signing contracts to buy previously owned homes held in February near an almost two-year high, a sign that the real estate market may be stabilizing.

Bailout Fund

Gains in stocks were also driven by speculation the European Union will increase the size of its bailout fund. European finance ministers meet March 30 to discuss raising a 500 billion-euro ($664 billion) ceiling on the region’s financial firewall. Chancellor Angela Merkel said Germany may back plans for the temporary and permanent euro-area rescue funds to run in parallel.

“Europe took care of a liquidity problem, but the solvency concern still remains,” E. William Stone, chief investment strategist at PNC Wealth Management in Philadelphia, said in a telephone interview. His firm manages about $107 billion. “Some action to bolster the firewall would be viewed as positive.”

All 10 groups in the S&P 500 rose today as some of the largest companies rallied. The Dow Jones Transportation Average, a proxy for the economy, gained 1.4 percent. The KBW Bank Index added 1.5 percent as 23 of its 24 stocks rose. Amazon.com increased 4 percent to $202.87. JPMorgan climbed 2.2 percent to $46.17.

Apple Rallies

Apple jumped 1.8 percent to a record $606.98. Chief Executive Officer Tim Cook visited the world’s most populous country, where store openings have trailed a forecast the company made two years ago. Cook had “great meetings” with Chinese officials, Carolyn Wu, a Beijing-based spokeswoman, said by phone, without identifying the officials.

A measure of health-care companies in the S&P 500 rose the most among 10 industries, adding 1.7 percent. Pfizer added 1.6 percent to $22.16. Tenet Healthcare Corp. (THC) had the second-biggest advance in the S&P 500, adding 5.5 percent to $5.54.

The U.S. Supreme Court opened historic arguments on President Barack Obama’s health-care overhaul by debating whether it should rule this year at all. The justices are considering whether an 1867 law bars them from ruling for now on the measure that requires almost every American to get health insurance by 2014 or pay a penalty.

Weight Loss

Arena Pharmaceuticals Inc. (ARNA) soared 25 percent to $3.01, the highest level since September 2010. The weight-loss pill maker faces an advisory panel on May 10 as Food and Drug Administration staff said in a report today that obesity treatment manufacturers may need to study the heart risks of their medicines before U.S. regulators weigh approval.

Edwards Lifesciences Corp. (EW) rallied 5.9 percent, the most in the S&P 500, to $75.51. The company’s Sapien device replaces damaged aortic heart valves as well as surgery, without cracking open the chest or triggering higher rates of stroke or death after two years, a company-funded study found.

Lions Gate Entertainment Corp. (LGF) added 4.5 percent to $15.18. “The Hunger Games” collected $155 million in weekend sales in the U.S. and Canada, a record opening for the company and for the month of March.

Safeway Inc. (SWY) declined 3.4 percent, the biggest loss in the S&P 500, to $20.42. The grocer was cut to neutral from outperform at Credit Suisse Group AG, meaning the firm expects the stock to perform in-line with the market over the next 12 months.

Since IPO

A123 Systems Inc. (AONE) tumbled 12 percent to $1.49, the lowest price since it went public in September 2009. The company said it’s replacing defective battery packs and modules it supplies to customers, including Fisker Automotive Inc., and that the flaw caused a Fisker Karma to shut down in a Consumer Reports test.

The S&P 500 today erased last week’s 0.5 percent decline and extended its monthly advance to 3.7 percent. The benchmark measure is poised for a fourth straight monthly gain, the longest winning streak since September 2009. The index has risen 13 percent in 2012 amid better-than-estimated economic and corporate data. It trades for 14.6 times reported earnings, below the average since 1954 of 16.4.

Hedge funds trailing the S&P 500 for the last five months are giving up on bearish bets and buying stocks at the fastest rate in two years.

Hedge-Fund Bullishness

A gauge of hedge-fund bullishness measuring the proportion of bets that shares will rise climbed to 48.6 last week from 42 at the end of November 2011, the biggest increase since April 2010, according to data compiled by the International Strategy & Investment Group. The Bloomberg aggregate hedge fund index gained 1.4 percent last month, lagging behind the S&P 500 by 2.65 percentage points.

Money managers struggling to catch up with the gains have contributed to the rally that pushed the S&P 500 up 27 percent since October.

Market bulls say they are a continuing source of cash that can move stocks higher. Bears say capitulating hedge funds are further evidence that equities have risen too far, too fast as economic growth remains sluggish, warning that the pool of potential buyers is being depleted.

“It’s encouraged me to gradually increase my exposure to stocks,” Barton Biggs, founder of hedge fund Traxis Partners LP in New York, said in a March 23 phone interview, referring to an improving economic outlook. “The shift has occurred gradually in the six or so months since the beginning of October. I’d be inclined to raise my net long further because the potential to the upside would be greater” should the S&P 500 fall 5 percent to 7 percent, he said.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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

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Plouffe Says Americans Don’t Want ‘Refight’ on Health Care

By Joshua Gallu and Michael Riley - Mar 26, 2012 2:46 AM GMT+0700

Senior White House adviser David Plouffe defended the health care law enacted by President Barack Obama as the Supreme Court prepares for three days of hearings to determine the fate of the measure.

“Where the American people are right now is they don’t want to go refight this battle again,” Plouffe said today on CNN’s “State of the Union” program. “You ask people, should we go back to square one? People don’t want to do that.”

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The U.S. Supreme Court building in Washington. Photo: Andrew Harrer/Bloomberg

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March 23 (Bloomberg) -- The U.S. Supreme Court will soon hear one of its most important cases in years -- the challenge to the Obama Administration's health care reform law. Bloomberg Law highlights what you need to know before the arguments begin, March 26-28. (Source: Bloomberg)

The Supreme Court is scheduled to hear arguments this week in a challenge that pits the Obama administration against 26 states that say Congress overstepped its authority by requiring Americans to obtain health insurance or pay a penalty. Obama’s health-care overhaul is shaping up as a prime issue in the presidential election, as is a Republican plan to cut taxes and federal spending.

The law signed by Obama in 2010 has been criticized by Republican presidential candidates, including Mitt Romney and Rick Santorum, who have said they would repeal it if they win the November presidential election.

“The important thing right now, what we can control is, implement this law well, make sure that we continue to try to educate people about what’s in the law,” Plouffe said in the interview. “The Supreme Court process will play out.”

Godfather of Mandates

Plouffe, speaking on NBC’s “Meet the Press,” called Romney the “godfather” of health-care insurance mandates, referring to the former governor’s role in enacting a law in Massachusetts that resembles the federal plan pushed by Obama.

In an interview today with CBS’s “Face the Nation,” Santorum echoed Plouffe on that count, calling Romney the “worst candidate” to campaign against Obama on the issue of health-care insurance.

“Heck, he created the blueprint for the government takeover of health care that President Obama followed,” Santorum, who won yesterday’s Republican presidential primary in Louisiana, said.

Romney, who leads in the number of delegates needed to win the Republican nomination, has said that, while he supported the individual mandate for the state of Massachusetts, the federal government shouldn’t impose the requirement in all states.

‘Rubber Stamp’

Plouffe, in an interview today with ABC’s “This Week,” said Romney would “rubber stamp” a budget proposal by House Budget Committee Chairman Paul Ryan that “showers huge additional tax cuts on the wealthy.”

On “Fox News Sunday,” Ryan, the architect of the House budget plan to cut federal spending over 10 years by $5.3 trillion below Obama’s budget, said that Republicans might consider eliminating popular tax breaks on only the highest earners.

Those include the home mortgage deduction, which congressional budget analysts estimate costs the Treasury $100 billion a year, or the exclusion of employer-provided health insurance from taxable income, which costs $164 billion a year. Ultimately, those details would have to be decided by the House Ways and Means Committee.

“Instead of giving those write-offs to people in the top tax brackets, take those tax shelters away,” Ryan said in the interview on Fox. “You get more revenue and we can lower everybody’s tax rate in return.”

To contact the reporters on this story: Joshua Gallu in Washington at jgallu@bloomberg.net; Michael Riley in Washington at mriley17@bloomberg.net

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net

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Lawmakers Urge Investigation of Facebook Password Requests

By Michael Riley - Mar 26, 2012 3:12 AM GMT+0700

Two U.S. senators will ask the Justice Department to investigate whether employers who require job applicants to hand over confidential passwords to Facebook and other social networking sites are violating federal law, the lawmakers said today.

New York Senator Charles Schumer, the Senate’s third- ranking Democrat, and Senator Richard Blumenthal, a Democrat from Connecticut, will ask the U.S. Equal Employment Opportunity Commission to examine the practice as well.

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The Facebook Inc. logo is reflected in the eyeglasses of a user. Photographer: David Paul Morris/Bloomberg

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New York Senator Charles Schumer, the Senate's third-ranking Democrat, speaks at a news conference at the U.S. Capitol on March 21, 2012 in Washington, D.C. Photographer: Win McNamee/Getty Images

On Friday, Facebook Inc. (FB), the world’s biggest social networking site, said reports that some businesses were asking potential employees for passwords in order to view private posts and pictures as part of the job application process were “alarming.” The two Democratic lawmakers said the practice could violate federal anti-hacking statutes.

“Employers have no right to ask job applicants for their house keys or to read their diaries. Why should they be able to ask them for their Facebook passwords?” Schumer said in a press release sent to reporters.

Blumenthal said that by requiring job applicants to provide login credentials, employers could gain access to protected information that would be impermissible for them to consider when making hiring decisions. Those include religious affiliation and sexual orientation, which are protected categories under federal law.

Discrimination Lawsuits

Facebook said March 23 that accessing such information also could expose businesses to discrimination lawsuits. The company said it might ask policy makers to take action to stop the practice.

“An investigation by the Department of Justice and Equal Employment Opportunity Commission will help remedy ongoing intrusions and coercive practices,” Blumenthal said in the senators’ statement.

Laura Sweeney, a Justice Department spokeswoman who responded by e-mail, had no immediate comment on the lawmakers’ request.

Facebook and other sites are already used by some potential employers seeking additional background on job applicants because of the personal information posted there. As Facebook has given users additional ways to protect that information from public view, reports have surfaced of employers asking job applicants to voluntarily give them access by providing personal login credentials.

The Associated Press first reported the growth in the practice last week. Elliot Schrage, a Facebook spokesman, didn’t immediately respond to an e-mail requesting comment on the call for an investigation.

Anti-Hacking Law

In a copy of the letter sent to Attorney General Eric Holder and provided to reporters, Blumenthal and Schumer asked the department to investigate whether the practice is a violation of the Computer Fraud and Abuse Act, the primary federal anti-hacking statute.

The lawmakers also asked the department to investigate whether the practice violates the Stored Communications Act, which prohibits intentional access to electronic information without authorization or in excess of authorization.

In a letter to EEOC chairman Jacqueline Berrien, the lawmakers requested an investigation into whether the practice “may be used to unlawfully discriminate against otherwise qualified applicants.”

“We strongly urge the commission to investigate and issue a legal opinion,” the letter said.

To contact the reporter on this story: Michael Riley in Washington at michaelriley@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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Monti Signals Spanish Euro Risk as EU to Bolster Firewall

By Patrick Donahue - Mar 26, 2012 5:01 AM GMT+0700

Italy’s Prime Minister Mario Monti warned that Spain could reignite the European debt crisis as euro-area ministers this week prepare a deal to strengthen the region’s financial firewall.

Monti pointed to Spain’s struggle to control its finances ahead of a finance ministers meeting in Copenhagen starting on March 30, where officials will seek agreement to raise a 500 billion-euro ($664 billion) ceiling on bailout funding.

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Italy’s Prime Minister Mario Monti speaks at the Chigi Palace in Rome on March 13, 2012. Photographer: Alessia Pierdomenico/Bloomberg

“It doesn’t take much to recreate risks of contagion,” Monti said during the weekend at a conference in Cernobbio, Italy. Days after his Cabinet approved a bill to overhaul Italy’s labor laws, Monti praised Spain’s efforts to loosen work regulations while advising it to focus on cutting the national budget. Spain “hasn’t paid enough attention to its public accounts,” he said.

The euro crisis has eased after the European Central Bank last month boosted liquidity through three-year loans to banks, while European Union leaders this month sealed a second Greek bailout package. Still, signs of a deepening economic recession in the region and struggles to meet austerity goals have kept decision makers on alert, underscored by rising Spanish and Italian yields.

Spain’s 10-year yields climbed for a third week last week after Willem Buiter, Citigroup Inc. chief economist, said the nation faced an increasing risk of debt restructuring. Yields on the security climbed by 19 basis points last week to 5.39 percent, while similar-maturity Italian debt rose 20 basis points to 5.06 percent.

Reinforcing Firewalls

EU Economic and Monetary Affairs Commissioner Olli Rehn said he was confident ministers will resolve their differences on providing more bailout funding for the euro. Speaking yesterday to reporters in Saariselkae, Finland, Rehn said that officials “will take a convincing decision on the reinforcement of the firewalls.”

Euro-area leaders have established two bailout funds, the temporary European Financial Stability Facility and the permanent 500 billion-euro European Stability Mechanism, which is scheduled to begin operations this year. Under current rules, unused EFSF funds would be passed on to the ESM, though disbursement could not exceed the half-trillion limit.

Policy makers are discussing how to add to the funds, for example by allowing the EFSF and ESM to work concurrently to make more money available. Deploying unused sums from the temporary fund while allowing the ESM to operate at capacity would bring a total crisis backstop to 692 billion euros.

General Strike

German Chancellor Angela Merkel and her finance minister, Wolfgang Schaeuble, have abandoned their opposition to combining the two funds, Der Spiegel reported yesterday, citing unnamed government officials. The two leaders have agreed that the EFSF and ESM may be “in operation” for a transitional period, the magazine reported.

The focus by policy makers and investors has shifted over recent weeks from Greece to Spain, where Prime Minister Mariano Rajoy is struggling to reduce the country’s budget deficit in the face of a looming recession.

Rajoy faces his first general strike on March 29 as unions protest against changes to employment laws making it cheaper to fire workers and cut wages. Three months after coming to power, he is due to present the 2012 budget on March 30, which is designed to cut the deficit.

ECB Loans

Meanwhile, Rajoy failed to win an outright majority in elections for Spain’s most populous region, Andalusia, last night. Even though his People’s Party took more seats in the legislature than any other, it fell short of the 55 needed. The region has been controlled by the Socialists since Spain’s return to democracy in 1978

The conundrum for European leaders was underscored on March 22, when a report showed that euro-area services and manufacturing output contracted more than economists forecast. The drop in March on declining domestic demand added to signs that the region’s economy is sliding into recession.

Leaders struggling to resolve the crisis have been given some space by the ECB’s three-year loans to banks, made between December and February. Speaking at the seminar he hosted in Saariselkae, north of the Arctic Circle, Prime Minister Jyrki Katainen warned that crisis management “can’t be outsourced” to the region’s central bank.

“While more than a trillion euros is not exactly small change,” the ECB’s loans “have certainly not solved the euro area’s problems once and for all,” Joachim Fels, chief economist at Morgan Stanley, wrote in a note yesterday.

As he lauded Rajoy’s efforts to loosen rules on employee dismissals, Monti pushed a bill to overhaul Italy’s labor laws through Cabinet on March 23, facing down opposition from unions and political allies needed to pass the measure in parliament.

Illustrating the difficulties in establishing consensus for change, Pier Luigi Bersani, the head of the Democratic Party on whom Monti relies for backing in parliament, has said he will seek to get the law amended during debate. The CGIL, Italy’s biggest union, has called a general strike.

The Italian premier, in office since replacing Silvio Berlusconi in November, opted not to force through a decree that would have implemented the measures immediately.

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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Bats Founder Says Suspend Bonuses, Resurrect IPO

By Nick Baker - Mar 26, 2012 4:23 AM GMT+0700

Bats Global Markets Inc. (BATS) should suspend employee bonuses and resurrect its botched initial public offering by the end of June, according to founder Dave Cummings, who defended the changes to U.S. equities markets that the company benefited from.

The third-largest operator of U.S. stock exchanges withdrew the IPO on March 23 after errors on its own computers kept the stock from trading and halted Apple Inc. Pulling the deal capped a day of embarrassments for the Lenexa, Kansas-based company, which rose to prominence with the electronic trading industry.

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Dave Cummings, founder of Bats Global Markets Inc. Source: Bats Global Markets Inc. via Bloomberg

“This was a freak one-time event,” Cummings, 43, wrote in an e-mail today. He left Bats, which he founded in 2005, to rejoin high-speed trading firm Tradebot Systems Inc. in 2007. “American capitalism is sometimes messy, but it is what makes this country great.”

Chief Executive Officer Joe Ratterman said in an interview yesterday that the potential for “uncoordinated and chaotic” trading after bad code corrupted its computers prompted Bats to cancel the deal.

“Ironically, the software bug itself is probably the easiest thing to correct,” Cummings wrote. “Bats has built great software,” he said. “However, the code to open an IPO is new. It has been tested in the lab, but until this week not in real-world production. These systems are very complicated. Bugs do occur. Bats just happened to discover a bug at the most embarrassing time possible.”

Archipelago, Inet

Bats was formed two months after the New York Stock Exchange announced plans in 2005 to go public by combining with Archipelago Holdings Inc. and Nasdaq Stock Market announced its purchase of Inet ECN. Archipelago and Inet were then the largest electronic communication networks, or ECNs, which match buy and sell orders and compete with exchanges.

Cummings created Bats with 12 employees to counter the emerging NYSE and Nasdaq duopoly. Executives at Goldman Sachs Group Inc., Citigroup Inc., Merrill Lynch & Co. and other banks said in 2005 that the lack of competition after the purchases would hurt users by limiting their choice about how and where to execute orders and enabling exchanges to raise transaction fees.

“When the public wants to invest, they can push a button and get a fair fill in less than a second,” Cummings wrote today. “The markets will never be perfect, but the reality is that they work very well.”

Cummings, a Bats director, said employee bonuses should be suspended because of the failed offering.

“Bats won’t pay bonuses which were based on the completion of the IPO, since it wasn’t completed successfully,” Randy Williams, a Bats spokesman, said in an e-mail today.

To contact the reporter on this story: Nick Baker in New York at nbaker7@bloomberg.net

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

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Rovio Executive Says ‘Angry Birds Space’ Skips Windows Phone

By Jon Erlichman and Diana ben-Aaron - Mar 24, 2012 2:59 AM GMT+0700

An executive of the maker of “Angry Birds” said the latest edition of the world’s most popular mobile-phone game won’t appear on Microsoft Corp. (MSFT)’s Windows Phone platform, a possible blow to handset maker Nokia Oyj. (NOK1V)

“We’re the No. 1 app in the Windows Phone app store, but it’s a big undertaking to support it, and you have to completely rewrite the application,” Peter Vesterbacka, chief marketing officer of the game’s maker, Rovio Entertainment Oy, said in an interview on Bloomberg Television. He said Rovio, which yesterday started selling the new “Angry Birds Space” game for Apple Inc. (APPL)’s iPhone and handsets running Google Inc. (GOOG)’s Android platform, has no plans to release the title on Windows Phone.

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Angry Bird toys are seen on display at the headquarters of the game's developer Rovio Mobile Oy in Espoo, Finland, on Friday, Dec. 3, 2010. Photographer: Henrik Kettunen/Bloomberg

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March 23 (Bloomberg) -- Peter Vesterbacka, chief marketing officer of "Angry Birds" maker Rovio Entertainment Oy, says demand for the world's most popular mobile-phone game may reach 2 billion by the end of the year, boosted by the introduction of "Space." Jon Erlichman reports on Bloomberg Television's "Countdown." (Source: Bloomberg)

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March 22 (Bloomberg) -- Bloomberg's Jon Erlichman talks about the release of Rovio Entertainment Oy's "Angry Birds Space" mobile game today, and the company's bird and slingshot display on the Space Needle in Seattle. He speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

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March 22 (Bloomberg) -- Bloomberg's Jon Erlichman talks about the release of Rovio Entertainment Oy's "Angry Birds Space" mobile game today, and the company's bird and slingshot display on the Space Needle in Seattle. (Source: Bloomberg)

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Peter Vesterbacka, chief marketing officer and co-founder of Rovio Entertainment Oy, speaks during the TechCrunch Disrupt Beijing conference in Beijing, China. Photographer: Keith Bedford/Bloomberg

Rovio Chief Executive Officer Mikael Hed later told Reuters the company was “working towards” getting “Angry Birds Space” on the Windows Phone 7 operating system. Hed didn’t return calls by Bloomberg News. Ville Heijari, a spokesman for Rovio, said in e- mailed statement that the company is working toward offering its games on “all relevant platforms” and that it will announce “further platforms as soon as more information is available.”

Nokia is betting on the Windows Phone operating system to revive its struggling smartphone business. The lack of “Angry Birds” may make it more difficult for the company, based in the same Espoo, Finland-based office park as Rovio, to attract gaming-oriented users and persuade developers that its platform is growing.

China Push

“This is a worrying development for Windows Phone because it suggests that Rovio does not have much confidence in its future,” Nomura analyst Richard Windsor said today in a report. “As the standard version is already number one on the Windows Phone app store, it gives a strong indication that no one else will expect to be making money writing for this platform either.”

Nokia Chief Executive Officer Stephen Elop has introduced several Windows Phones since October and plans to bring the handsets next to China, where “Angry Birds” took off last year.

“China has been our second-largest market, but it’s actually been the fastest-growing for quite a while, and it could well be that China becomes the biggest market this year,” Vesterbacka said.

Nokia spokesman James Etheridge had no immediate comment when contacted today. The company’s shares rose 0.9 percent to 3.98 euros at the close in Helsinki. The stock has declined 33 percent in the past 12 months.

Elop, who took over at the world’s largest mobile-phone maker in 2010, shifted to Windows Phone last year after determining Nokia’s Symbian and MeeGo systems couldn’t keep up with Android, the fastest-growing smartphone platform, and the iPhone.

Chicken and Egg

Microsoft plans to bring its Windows Phone software to 23 more countries for a total of 63 and put the operating system on less expensive smartphones, it said last month. The company aims to move quickly in developing economies, where Google and Apple are less dominant, before cheaper Android phones can strengthen Google’s position.

“There is a chicken and egg situation here, where no apps means no users and no users means no apps,” Windsor said. “Nokia has tried in the past to get past this by paying developers directly to write applications but it has largely failed to bring any life back to the platform.”

For the time being, it’s too expensive for Rovio to adapt new games to Windows Phones, Vesterbacka said.

“If you look at activations, Apple’s iOS and Android are clearly bigger than any other platform,” he said. “We want to be on all screens, but we have to consider the cost of supplying the smaller platforms. With Windows Phone it’s a lot of work to technically support it.”

Flinging Birds

“Angry Birds” may reach a billion cumulative downloads in the next few months, boosted by the introduction of “Space,” and 2 billion by the end of the year, he said. That compares to just 50 million in late 2010, a year after the unveiling of the original game. Rovio predicts to introduce four more Angry Birds games by the end of the year, Vesterbacka said.

Basic “Angry Birds” game play consists of using a virtual slingshot to fling birds at structures populated by green pigs. The game zoomed to the top of the chart in Apple’s online app store in 2010 before being rolled out for Android phones, desktop computers and e-readers. The Facebook version is approaching 20 million active users, Vesterbacka said.

Rovio, which has more than 300 employees, also sold about 25 million plush toys last year and has started a book division with a cookbook and comics.

Closely held Rovio published 51 games for Nokia phones and other handsets before releasing “Angry Birds.” The game is on Nokia’s current smartphones and some lower-end models.

The new version of “Angry Birds,” which takes place in space with planetary gravity interfering with the birds’ flight paths, is available for Windows personal computers as well as Apple Mac computers.

To contact the reporter on this story: Jon Erlichman in New York at jerlichman1@bloomberg.net; Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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MF Global’s Corzine Ordered Funds Transferred, Memo Says

By Phil Mattingly and Silla Brush - Mar 25, 2012 3:33 AM GMT+0700

Jon S. Corzine, MF Global Holding Ltd. (MFGLQ)’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in a brokerage account with JPMorgan Chase & Co. (JPM), according to a memo written by congressional investigators.

Edith O’Brien, a treasurer for the firm, said in an e-mail quoted in the memo that the transfer was “Per JC’s direct instructions,” according to a copy of the memo obtained by Bloomberg News yesterday. The e-mail, dated Oct. 28, was sent three days before the company collapsed, the memo says. The memo does not indicate whether that phrase was the full text of the e-mail or an excerpt.

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Jon S. Corzine, former chairman and chief executive officer of MF Global Holdings Ltd. Photographer: Andrew Harrer/Bloomberg

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March 23 (Bloomberg) -- Jon S. Corzine , MF Global Holding Ltd.’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co. accounts in London, according to an e-mail sent by a firm executive. Bloomberg's Julie Hyman reports on Bloomberg Television's "Street Smart." (Source: Bloomberg)

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March 23 (Bloomberg) -- Bloomberg News reporter Phil Mattingly, Jay Pelosky, consultant at J2Z Advisory, Bloomberg View columnist William Cohan, Robert Brusca, president of Fact & Opinion Economics, and Bloomberg Television markets correspondent Joshua Lipton talk about a Bloomberg News report that Jon S. Corzine, MF Global Holding Ltd.’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co. accounts in London, according to an e-mail sent by a firm executive. They speak with Pimm Fox on Bloomberg Television's "Taking Stock." (Cohan is a Bloomberg View columnist. The opinions expressed are his own. Source: Bloomberg)

The account could have contained both client and company funds, the memo notes. Whether the transferred funds were those of the company, its clients or both is not known.

“If client funds were transferred at his direction, it raises new questions,” Seth Berenzweig, managing partner at Berenzweig Leonard LLP, a law firm in McLean, Virginia, said in an interview with Bloomberg Television. “This is a new storm cloud that is now headed for Jon Corzine and it raises a lot of issues.”

O’Brien’s internal e-mail was sent as the New York-based broker found intraday credit lines limited by JPMorgan, the firm’s clearing bank as well as one of its custodian banks for segregated customer funds, according to the memo, which was prepared for a March 28 House Financial Services subcommittee hearing on the firm’s collapse. O’Brien is scheduled to testify at the hearing after being subpoenaed.

‘Funds Were Safe’

“Over the course of that week, MF Global (MFGLQ)’s financial position deteriorated, but the firm represented to its regulators and self-regulatory organizations that its customers’ segregated funds were safe,” said the memo, written by Financial Services Committee staff and sent to lawmakers.

Steven Goldberg, a spokesman for Corzine, said in a statement that Corzine “never gave any instruction to misuse customer funds and never intended anyone at MF Global to misuse customer funds.”

Vinay Mahajan, global treasurer of MF Global Holdings, wrote an e-mail on Oct. 28 that JPMorgan was “holding up vital business in the U.S. as a result” of the overdrawn account in London, which had to be “fully funded ASAP,” according to the memo.

$200 Million Transfer

“On the afternoon of Friday, October 28, MF Global transferred $200 million from a segregated customer account at JPMC to cover a $175 million overdraft in one of MF Global’s JPMC accounts in London,” the memo says. “Ms. O’Brien wrote in an e-mail that the transfer was ‘Per JC’s [Jon Corzine’s] direct instructions’.”

Barry Zubrow, JPMorgan’s chief risk officer, called Corzine to seek assurances that the funds belonged to MF Global and not customers. JPMorgan drafted a letter to be signed by O’Brien to ensure that MF Global was complying with rules requiring customers’ collateral to be segregated. The letter was not returned to JPMorgan, the memo said.

Corzine, 65, in testimony in front of the House panel in December, said he did not order any improper transfer of customer funds. Corzine also testified that he never intended a misuse of customer funds at MF Global, and that he doesn’t know where client funds went.

‘Never Intended’

“I never gave any instruction to misuse customer funds, I never intended anyone at MF Global to misuse customer funds and I don’t believe that anything I said could reasonably have been interpreted as an instruction to misuse customer funds,” Corzine told lawmakers in December.

In his statement, Goldberg said Corzine did not specify which funds should be used to replenish the JPMorgan account.

“He never directed Ms. O’Brien or anyone else regarding which account should be used to cure the overdrafts, and he never directed that customer funds should be used for that purpose,” Goldberg said. “Nor was he informed that customer funds had been used for that purpose.”

The bankruptcy trustee overseeing the liquidation of the company’s brokerage subsidiary has estimated a $1.6 billion shortfall between customer claims and assets available.

Lawmakers and investigators from the Commodity Futures Trading Commission, Securities and Exchange Commission and Department of Justice have been reviewing events leading up to MF Global’s bankruptcy filing. Executives including Corzine, a Democrat who served in the Senate from 2001 to 2006 and as governor of New Jersey from 2006 to 2010, gave testimony on the collapse at three congressional hearings last year. Corzine was co-chairman of Goldman Sachs Group Inc. (GS) before entering politics.

Congressional Report

Representative Randy Neugebauer, a Texas Republican and chairman of the Financial Services oversight and investigations subcommittee, is preparing a final report on his investigation into the firm’s failure.

“One of the goals of our investigation is not only to find out where the money went but to identify what went wrong in order to prevent this from happening again,” Neugebauer said in a statement.

O’Brien is scheduled to appear before lawmakers with Christine Serwinski and Laurie Ferber, two other MF Global executives named by Corzine as being involved in the transaction, according to the memo. Henri Steenkamp , the firm’s chief financial officer, is also scheduled to testify, as is a representative from JPMorgan who has not yet been identified.

European Bet

MF Global and its brokerage sought Chapter 11 bankruptcy after a $6.3 billion bet on the bonds of some of Europe’s most indebted nations prompted regulator concerns and a credit rating downgrade. Corzine quit MF Global Nov. 4.

During his testimony, Corzine identified O’Brien as someone with knowledge of a transfer of funds from customer accounts before the firm sought bankruptcy protection Oct. 31.

Reid H. Weingarten, O’Brien’s lawyer, did not respond to a phone call and e-mail seeking comment.

The memo’s account of the e-mail exchanges aligns with what Terrence Duffy, the executive chairman at CME Group Inc. (CME), told lawmakers during a December congressional hearing. Auditors at CME, which had authority to oversee MF Global, learned from an employee of the brokerage that Corzine knew about the loans involving a European affiliate, Duffy told committee members.

To contact the reporters on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net; Silla Brush in Washington at sbrush@bloomberg.net

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net

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U.S. Tax Breaks Valued at More Than $1 Trillion, WSJ Reports

By Dan Hart - Mar 24, 2012 7:54 PM GMT+0700

The value of U.S. tax breaks exceeds $1 trillion, which may give both parties potential areas to cut costs and alleviate the cost of changing the tax code, the Wall Street Journal reported, citing a study.

The Congressional Research Service report found the biggest tax break is likely to be valued at $164 billion annually in 2014 and is on employer-provided health insurance, while employer-provided pensions are the second-biggest exclusion at about $163 billion, the newspaper said.

The study said the most that might be gained in additional tax revenue from eliminating tax breaks was $150 billion, because of political opposition and technical hurdles, the newspaper said.

Lawmakers might only be able to reduce tax rates by one or two percentage points for the top individual rate, the Journal said, citing the report.

To contact the reporter on this story: Dan Hart in Washington at dahart@bloomberg.net

To contact the editor responsible for this story: Sylvia Wier at swier@bloomberg.net

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