DealBook: R.B.S. to Pay $612 Million Over Rate Rigging

A campaign to root out financial fraud secured a victory on Wednesday, as authorities took aim at the Royal Bank of Scotland for its role in an interest rate manipulation scheme that has emboldened prosecutors and consumed the banking industry.

American and British authorities struck a combined $612 million settlement with the bank, the latest case to emerge from the global investigation into rate-rigging. The Justice Department dealt another blow to the bank, forcing its Japanese unit to plead guilty to criminal wrongdoing.

The penalty for the subsidiary, a hub of rate manipulation, underscores a recent shift in the way federal authorities punish financial wrongdoing. The R.B.S. case echoed an earlier action taken against a UBS subsidiary, which similarly pleaded guilty to felony wire fraud as part of a larger settlement. These cases represent the first units of a big bank to agree to criminal charges in more than a decade.

“I want financial institutions to know that this department will absolutely hold them to account,” Lanny Breuer, head of the Justice Department’s criminal division, said in an interview Wednesday.

Some of the world’s largest financial institutions remain caught in the cross hairs of the rate manipulation case, an investigation that could drag on for years. Authorities suspect that more than a dozen banks falsified reports to influence benchmarks like the London Interbank Offered Rate, or Libor, which underpins the costs for trillions of dollars in financial products like mortgages and credit cards.

A person involved in the investigation indicated that the first banks to settle were among the worst actors in the rate case. But they also received a “discount” for their eager cooperation, according to people with knowledge of the matter.

That approach raises the prospect that remaining banks could face high-priced settlements.

Deutsche Bank, which set aside an undisclosed amount to cover potential penalties and suspended five employees tied to the case, is expected to settle with authorities in late 2013, several people briefed on the matter said. But the timetable could shift. The bank is not in formal settlement talks and is not prepared to resolve the case, the people said.

While foreign banks have borne the brunt of the scrutiny, an American institution could be among the next to settle. Citigroup and JPMorgan Chase are under investigation by the Commodity Futures Trading Commission, the American regulator leading the case, though actions are not imminent.

The R.B.S. action concluded a first phase of rate-rigging investigations for authorities, who are now planning to take a brief hiatus from filing cases. The next case is not expected until spring at the earliest, two of the people briefed on the matter said.

Some bank executives, fearful that fallout from the case will stain their firms, are pushing for a broad deal encompassing multiple institutions. But authorities are balking at a “global settlement,” people involved in the case say, arguing that investigations are proceeding at different stages and involve widely varying fact patterns.

As regulators continue to pursue actions, prosecutors are planning charges against traders involved in the scheme. The first charges came last year when the Justice Department filed actions against two former UBS traders.

“Our investigation is far from finished,” Mr. Breuer said.

The rate-rigging case has centered on how much banks charge each other for loans. Such figures form the basis of Libor and other rates. But banks corrupted the process. Government complaints filed over the last year outlined a scheme in which banks reported false rates to lift trading profits.

Authorities announced the first Libor case in June, extracting a $450 million settlement with the British bank Barclays. In December, UBS agreed to a record $1.5 billion settlement with authorities. The Justice Department also secured the guilty plea from one of the bank’s subsidiaries.

Royal Bank of Scotland, based in Edinburgh, had aimed to avert the guilty plea for its Japanese subsidiary, people involved in the case said. But the Justice Department’s criminal division declined to back down, and the bank had little leverage to push back. It decided not to formally appeal its case to Attorney General Eric H. Holder Jr., another person said.

With fines coming from multiple authorities, the $612 million case amounted to the second-largest penalty levied in the multiyear investigation into rate manipulation. “The settlement with R.B.S. is much more than a slap on the wrist,” argued Bart Chilton, a member of the trading commission who is critical of soft fines on big banks.

The settlement represents the latest setback for Royal Bank of Scotland, which has struggled to shake the legacy of the 2008 financial crisis. The British firm, which is majority-owned by the government after a bailout, already has put aside $2.7 billion to compensate customers who were inappropriately sold loan insurance in recent years.

Since the financial crisis, the bank has shaken up its management team and refocused its operations, as part of an effort to repair its bruised image. On Wednesday, it announced plans to claw back bonuses to help pay for the latest settlement.

At a news conference in London on Wednesday, Stephen Hester, the bank’s chief executive, admitted that the rate-rigging episode significantly strained the bank. “It is one of the most difficult moments over the entire period,” he said.

As authorities stitched together the R.B.S. case, they seized on a series of colorful e-mails that highlighted an effort to influence the rate-setting process, a plot that spanned multiple currencies and countries from 2006 to 2010. One Royal Bank of Scotland trader mused in a 2007 message how the process was becoming a “cartel,” adding “its just amazing how libor fixing can make you that much money.”

The wrongdoing spread broadly, authorities say, noting that Royal Bank of Scotland “aided and abetted” UBS and other firms. A senior official at the Justice Department’s antitrust unit, Scott D. Hammond, contends that the bank “secretly rigged” interest rates.

A UBS trader, the department said, once asked a co-worker to “have a word with” another bank about Libor submissions. The UBS trader, Thomas Hayes, who was recently charged by the Justice Department with fraud, indicated that he had already approached R.B.S. for help.

The government complaints also portray a permissive culture that allowed rate-rigging to persist for four years. David Meister, the enforcement director of the trading commission, declared that “the environment was ripe for manipulation at R.B.S.”

The bank’s own records captured the scheme in striking detail, revealing how traders pressured other employees to submit certain rates. Submitters and traders sat in earshot of each other in London, forming what authorities termed a “cozy ring.” The bank eventually separated the employees, who then moved to make additional requests via instant messages.

To persuade employees who submitted Libor rates, some traders promised affection. Others offered steak and sushi. One trader resorted to begging, invoking a plea of “pretty please.” Another trader, after pressuring a colleague to submit a certain rate, offered a reward of sorts: “I would come over there and make love to you.”

When authorities began scrutinizing the bank, the traders adopted a more covert approach. In 2010, a Libor submitter rebuffed an instant message request to influence rates. But then the submitter called the trader to explain “we’re not allowed to have those conversations” over instant message.

The employees laughed, according to a transcript of the call, and the submitter reassured the trader that he would fulfill the request: “Leave it with me, and uh, it won’t be a problem.”

Read More..

Daniel Doctoroff Enlists Bloomberg in A.L.S. Research

Nicole Bengiveno/The New York Times

Daniel L. Doctoroff, second from right, chief executive of Bloomberg L.P., at Columbia University’s Motor Neuron Center.

Daniel L. Doctoroff watched in pain as his father developed a limp one day, was found to have Lou Gehrig’s disease, and died within two years. Then an uncle also developed symptoms of the same disease, and died soon after.

Now Mr. Doctoroff, like many other relatives of Lou Gehrig’s disease victims, worries that he or his children may someday develop the illness.

But unlike many, he is in a position to try to do something about it. At a time when scientists are making rapid gains in the genetic roots of many diseases, Mr. Doctoroff, a former deputy mayor and private equity investor, is working with Mayor Michael R. Bloomberg and a private equity director, David M. Rubenstein, to put together a $25 million package of donations to support research to try to cure this rare and usually fatal degenerative neurological illness.

“This is a devastating disease,” Mr. Doctoroff said in an interview this week in the glass high-rise on the Upper East Side that houses Bloomberg L.P., the mayor’s media and financial information company, where Mr. Doctoroff is now chief executive. “Up to now, there’s been basically no hope. I have the resources, and I think it’s my obligation to do that.”

The gift is part of a wave of investment based on the booming field of genomic analysis. The money will go to a project called Target A.L.S., a consortium of at least 18 laboratories, including ones at Columbia and at Johns Hopkins, the mayor’s alma mater, working to find biological “targets,” like gene mutations, and the biochemical changes they cause in the spinal cord, that could be used to test potential drug therapies for the disease, formally known as amyotrophic lateral sclerosis.

It comes on top of a previous $15 million gift by Mr. Doctoroff, Bloomberg Philanthropies and other donors. By comparison, the National Institutes of Health, the single largest source of research financing for the disease, expects to give $44 million in 2013.

This is not Mr. Bloomberg’s first time supporting charitable causes that are dear to his close associates. The mayor quietly gave at least $1 million to put the name of his top deputy mayor, Patricia E. Harris, on a new academic center at her alma mater, Franklin & Marshall College in Lancaster, Pa.

Mr. Doctoroff said the conversation about A.L.S. in which he got Mr. Bloomberg involved “lasted about five seconds.” He declined to say what share of the money each of the three donors was giving.

Mr. Rubenstein, a founder of the Carlyle Group, said Wednesday that he had long been fascinated with A.L.S. because of its association with Gehrig, the baseball player who died of it. He wondered why more than 70 years later so little progress had been made in treating it.

He said he jumped at the chance to join in because he thought that A.L.S. research was underfinanced owing to the rarity of the disease, and that even a small amount of money could make a big difference.

In the Bloomberg administration, where he was deputy mayor for economic development and rebuilding from 2002 to 2008, Mr. Doctoroff was best known for his dogged — and ultimately dashed — attempt to bring the 2012 Olympics to New York City. (London got the Games.) Now that he has left City Hall, he no longer rides his bike to work — he says the 2.6-mile route from the Upper West Side to his office is too short — but he sometimes runs.

At Bloomberg, he sits in front of a conference room with walls of hot-pink glass, while carp swim in a giant fish tank nearby. He keeps no family photos or other personal mementos on his desk, and talking about his family’s disease history does not seem easy for him.

A.L.S. is rare, with about 2 new cases diagnosed a year per 100,000 people, according to the A.L.S. Association. A vast majority of cases are “sporadic,” in people who have no family history, while only 5 to 10 percent of cases are inherited. There appear to be no racial, ethnic or socioeconomic predispositions.

There is some speculation about environmental factors, like exposure to toxic chemicals and high physical activity that athletes might endure, “but nothing firm,” said Christopher E. Henderson, a researcher at Columbia and the Target A.L.S. project’s scientific director. Some researchers suspect a link between A.L.S. and head trauma suffered by professional football players.

Mr. Doctoroff’s father, Martin, an appeals court judge in Michigan, received the diagnosis in 2000 and died in 2002. One of Martin Doctoroff’s brothers, Michael, was found to have the disease in 2009 and died in 2010.

“When my father contracted the disease and passed away, it was very easy to chalk it up to bad luck,” Mr. Doctoroff said. “When my uncle got it, it obviously had broader implications.”

Given his family history, Mr. Doctoroff estimates that there is a 50-50 chance that he has the gene, C9orf72, that could lead to A.L.S. But he has chosen not to be tested, which would have implications not just for him but for his three children. “It’s very personal, but I’m not sure that I want to know,” he said.

Even when family members develop the disease, it can occur at vastly different ages, so he could still be in suspense even after testing. “Assuming you have the gene, you don’t know when you would actually get the disease,” he said. His uncle was 71. His father was 66. He is now 54.

Sheelagh McNeill contributed reporting.

This article has been revised to reflect the following correction:

Correction: February 6, 2013

An earlier version of a picture caption with this article misstated Daniel L. Doctoroff’s title at Bloomberg L.P. He is the chief executive, not the executive director.

Read More..

Daniel Doctoroff Enlists Bloomberg in A.L.S. Research

Nicole Bengiveno/The New York Times

Daniel L. Doctoroff, second from right, chief executive of Bloomberg L.P., at Columbia University’s Motor Neuron Center.

Daniel L. Doctoroff watched in pain as his father developed a limp one day, was found to have Lou Gehrig’s disease, and died within two years. Then an uncle also developed symptoms of the same disease, and died soon after.

Now Mr. Doctoroff, like many other relatives of Lou Gehrig’s disease victims, worries that he or his children may someday develop the illness.

But unlike many, he is in a position to try to do something about it. At a time when scientists are making rapid gains in the genetic roots of many diseases, Mr. Doctoroff, a former deputy mayor and private equity investor, is working with Mayor Michael R. Bloomberg and a private equity director, David M. Rubenstein, to put together a $25 million package of donations to support research to try to cure this rare and usually fatal degenerative neurological illness.

“This is a devastating disease,” Mr. Doctoroff said in an interview this week in the glass high-rise on the Upper East Side that houses Bloomberg L.P., the mayor’s media and financial information company, where Mr. Doctoroff is now chief executive. “Up to now, there’s been basically no hope. I have the resources, and I think it’s my obligation to do that.”

The gift is part of a wave of investment based on the booming field of genomic analysis. The money will go to a project called Target A.L.S., a consortium of at least 18 laboratories, including ones at Columbia and at Johns Hopkins, the mayor’s alma mater, working to find biological “targets,” like gene mutations, and the biochemical changes they cause in the spinal cord, that could be used to test potential drug therapies for the disease, formally known as amyotrophic lateral sclerosis.

It comes on top of a previous $15 million gift by Mr. Doctoroff, Bloomberg Philanthropies and other donors. By comparison, the National Institutes of Health, the single largest source of research financing for the disease, expects to give $44 million in 2013.

This is not Mr. Bloomberg’s first time supporting charitable causes that are dear to his close associates. The mayor quietly gave at least $1 million to put the name of his top deputy mayor, Patricia E. Harris, on a new academic center at her alma mater, Franklin & Marshall College in Lancaster, Pa.

Mr. Doctoroff said the conversation about A.L.S. in which he got Mr. Bloomberg involved “lasted about five seconds.” He declined to say what share of the money each of the three donors was giving.

Mr. Rubenstein, a founder of the Carlyle Group, said Wednesday that he had long been fascinated with A.L.S. because of its association with Gehrig, the baseball player who died of it. He wondered why more than 70 years later so little progress had been made in treating it.

He said he jumped at the chance to join in because he thought that A.L.S. research was underfinanced owing to the rarity of the disease, and that even a small amount of money could make a big difference.

In the Bloomberg administration, where he was deputy mayor for economic development and rebuilding from 2002 to 2008, Mr. Doctoroff was best known for his dogged — and ultimately dashed — attempt to bring the 2012 Olympics to New York City. (London got the Games.) Now that he has left City Hall, he no longer rides his bike to work — he says the 2.6-mile route from the Upper West Side to his office is too short — but he sometimes runs.

At Bloomberg, he sits in front of a conference room with walls of hot-pink glass, while carp swim in a giant fish tank nearby. He keeps no family photos or other personal mementos on his desk, and talking about his family’s disease history does not seem easy for him.

A.L.S. is rare, with about 2 new cases diagnosed a year per 100,000 people, according to the A.L.S. Association. A vast majority of cases are “sporadic,” in people who have no family history, while only 5 to 10 percent of cases are inherited. There appear to be no racial, ethnic or socioeconomic predispositions.

There is some speculation about environmental factors, like exposure to toxic chemicals and high physical activity that athletes might endure, “but nothing firm,” said Christopher E. Henderson, a researcher at Columbia and the Target A.L.S. project’s scientific director. Some researchers suspect a link between A.L.S. and head trauma suffered by professional football players.

Mr. Doctoroff’s father, Martin, an appeals court judge in Michigan, received the diagnosis in 2000 and died in 2002. One of Martin Doctoroff’s brothers, Michael, was found to have the disease in 2009 and died in 2010.

“When my father contracted the disease and passed away, it was very easy to chalk it up to bad luck,” Mr. Doctoroff said. “When my uncle got it, it obviously had broader implications.”

Given his family history, Mr. Doctoroff estimates that there is a 50-50 chance that he has the gene, C9orf72, that could lead to A.L.S. But he has chosen not to be tested, which would have implications not just for him but for his three children. “It’s very personal, but I’m not sure that I want to know,” he said.

Even when family members develop the disease, it can occur at vastly different ages, so he could still be in suspense even after testing. “Assuming you have the gene, you don’t know when you would actually get the disease,” he said. His uncle was 71. His father was 66. He is now 54.

Sheelagh McNeill contributed reporting.

This article has been revised to reflect the following correction:

Correction: February 6, 2013

An earlier version of a picture caption with this article misstated Daniel L. Doctoroff’s title at Bloomberg L.P. He is the chief executive, not the executive director.

Read More..

Gadgetwise Blog: Your Lost Bags Sent a Text. Come Get Them.

While services for tracking luggage with RFID tags, bar codes or GPS have been around for a while, a company called Trakdot is taking a slightly different approach. It is putting a radio transceiver on your bags that tells you where your luggage is when it isn’t where it should be.

It costs less than GPS trackers and the company says it is more secure than the RFID tags and bar codes.

The Trakdot doesn’t use GPS, which uses a lot of battery power. You don’t want the batteries to die before you get your bags back. Instead, it sends out a mobile phone signal that lets you find its general vicinity – within 30 feet, the company says – by seeing which cell towers it is near. This uses a lot less power than GPS. Trakdot estimates it can work for up to a month of continuous use on standard AA batteries.

Another battery saver, the Trakdot shuts down when on a plane. It senses when it is moving at more than 100 knots, then shuts down. Both the Federal Communications Commission and the Federal Aviation Administration have approved the device, according to the company.

Every 20 minutes the device pops on briefly to check speed, then shuts down again until the plane lands. Then it sends a text to show where the bag has arrived.

The Trakdot is $50, with an activation fee of $9 and a $13 annual fee. The device will be available in April.

The company concedes that a big warehouse might effectively block the signal, and that the Trakdot is as prone to dead areas as your mobile phone. If your bag disappears you should check Buffalo. That’s where my lost luggage goes. Always Buffalo.

Read More..

Japan Spends Heavily to Keep Whaling Industry Afloat, Report Says

TOKYO — A wildlife conservation group said in a report on Wednesday that Japan has been propping up its whaling industry with nearly $400 million in tax money in recent years, stepping up subsidies even as consumption of whale meat here has slumped.

The report, compiled by the International Fund for Animal Welfare, in Yarmouth Port, Mass., challenges assertions by the Japanese government that whaling is a tradition with wide support among Japanese consumers.

Instead, government figures tallied in the report paint a picture of a struggling industry employing fewer than 1,000 people and dependent on public handouts, including money meant for reconstruction after the devastating earthquake and tsunami of March 2011.

Most Japanese consumers have turned away from whale meat. The industry shipped just 5,000 tons in 2011, compared with 233,000 tons at the peak in 1962, according to data from the Ministry of Agriculture, Forestry and Fisheries. Demand this year is so low that the industry has cut its planned shipments by half, to 2,400 tons.

“Whaling is unprofitable, and survives only with substantial subsidies, something cultural and nationalist arguments for whaling obscure,” said Patrick Ramage, the director of the animal welfare fund’s whale program. He said the country would be better off economically and ecologically if it promoted whale-watching tourism instead of hunting whales.

Japan’s Fisheries Agency declined to comment on the report, saying it had not yet studied its contents.

But an official, speaking on the condition of anonymity, said there was “nothing wrong with these subsidies, which fund an important program,” though it was “not the government’s responsibility to make whaling economically viable.”

A world moratorium on commercial whaling took effect in 1986, but Japan has taken advantage of an exception allowing whaling for research purposes to continue hunting, though environmental activists who chase whaling boats have made those hunts increasingly difficult. Japan has captured and killed more than 14,000 whales since the moratorium began.

The meat from the whales is sold off as “byproducts” of research, and it makes its way to supermarkets, restaurants and even school lunches. A government Web site says the most popular whale dishes are fried whale, whale sashimi and medium-rare whale steak.

According to figures from the Institute of Cetacean Research, the nonprofit organization set up to run the whaling program, income from whale meat has failed to cover the costs of whaling for the past five years. So subsidies have been increased, and some disaster aid has been diverted to the industry, prompting a public outcry.

The dire financial picture prompted the government to announce a plan last year to cut costs by reducing the annual catch and to sell more whale meat directly to schools for lunches. But experts doubt that those measures will make the whaling industry self-sufficient again. 

“The Japanese government has desperately defended whaling for years, but the question has increasingly become: for what?” said Yusuke Saskata, a professor of environmental economics at Kinki University in Osaka. “Supporting whaling culture is one thing, but maintaining whaling at this scale makes no sense.”

Hisako Ueno contributed research.

Read More..

Economic Scene: Immigration Reform Issue: The Effect on the Budget

The stars could hardly have shone brighter on the prospects for immigration reform than in the early months of 2007.

The coalition pushing for change included the oddest of bedfellows — roping together business groups like the United States Chamber of Commerce with the Service Employees International Union, the fastest-growing union in the country. It had an impeccable bipartisan pedigree, including President George W. Bush and Senator Jon Kyl, a staunchly conservative Republican, as well as the Democrats’ liberal lion, Senator Ted Kennedy.

The economy was growing. The unemployment rate was at its lowest level since the dot-com bubble burst six years before. And the flaws of our immigration laws — impotent to stop a river of unauthorized immigrants drawn across the border by job opportunities — were obvious to all.

Immigration reform, however, was not to be.

Immigrants’ rights groups balked at the hurdles put in immigrants’ path toward legalization. The A.F.L.-C.I.O. hated a provision creating temporary work visas, arguing that it was a license for businesses to bring in cheap foreign labor. Then, a Senate Democrat, Byron Dorgan, offered the coup de grâce with an amendment to phase out the worker visa program after five years. Though proposed at the behest of organized labor, the amendment got the support of some of the most anti-union Republicans in the Senate. And it killed the entire enterprise, stripping away corporate America’s main reason to support a deal.

Today, the economy is not growing much. Unemployment remains stubbornly high. Yet President Obama thinks the stellar alignment may be  better than six years ago. He is proposing a wholesale change to the same flawed immigration laws. He trusts that Republicans, who lost the Hispanic vote by an enormous margin in November, cannot afford to further alienate Hispanics by voting against their top priority.

Despite the strong case for an overhaul, however, changing our immigration laws may be tougher than the president appears to believe. While we may have overcome some of the obstacles of 2007, reform will probably face deep-seated opposition from many Americans — including most conservative Republicans — to what they will view as a potentially large expansion of welfare.

President Obama’s proposal is based on principles similar to those of the 2007 attempt: a path to citizenship for millions of illegal immigrants in the country, a legal channel for future immigrant workers and their families, and a plan to better enforce the nation’s borders and immigration laws.

Yet immigration reform today means something quite different than it did in 2007. Notably, the elements needed to stop the flow of illegal immigrants north are much less important to the enterprise. The Obama administration has already spent huge amounts of money on border enforcement. Today, border policing costs about $18 billion a year — nearly 50 percent more than it did in 2006. And deportations have soared. What’s more, illegal immigration has slowed to a trickle, as Mexico has grown more robustly than the United States. The illegal immigrant population has even been shrinking in the last few years. And it may continue to do so as the Mexican population of prime migration-age people stops growing.

Also, many employers have already gotten some of what they wanted: the number of workers entering the United States on temporary visas for low-end jobs in agriculture and other industries has increased sharply.

“The discussion is in a different environment,” said Gordon H. Hanson, an expert on the economics of immigration at the University of California, San Diego. “The flow of new immigrants is not the story anymore.”

This might help the cause of reform in some ways. It could allow the discussion about work visas to focus on the highly educated workers coveted by technology companies and pre-empt the kind of argument between business and labor over visas for cheap immigrant workers that sank reform in 2007. The A.F.L.-C.I.O., for instance, has heartily embraced President Obama’s plan.

But what supporters of an overhaul of immigration law seem to be overlooking is that these very changes could also make it more difficult to build a coalition across the political divide. If reform is mainly about granting citizenship to 11 million mostly poor illegal immigrants with relatively little education, it is going to land squarely in the cross hairs of our epic battle about taxes, entitlements and the role of government in society.

It’s hard to say with precision what impact offering citizenship would have on the budget, but the chances are good that it would cost the government money. Half to three-quarters of illegal immigrants pay taxes, according to studies reviewed in a 2007 report by the Congressional Budget Office. And they are relatively inexpensive, compared with Americans of similar incomes. Their children can attend public schools at government expense — putting a burden on state and local budgets. But they are barred from receiving federal benefits like the earned-income tax credit, food stamps and Medicaid. Only their American-born children can get those.

Government revenue might not change much with legalization. Most illegal immigrants who don’t pay taxes probably work in the cash economy — as nannies or gardeners — where tax compliance among citizens is low. Costs, of course, would increase. Once they became citizens, immigrants would be entitled to the same array of government benefits as other Americans. For Social Security and Medicare alone, offering citizenship to illegal immigrants would mean losing a subsidy worth several billion dollars a year in payroll taxes from immigrants who can’t collect benefits in old age.

The White House and other backers of reform have made much of a 2007 Congressional Budget Office analysis concluding that the failed immigration overhaul would have increased government revenue by $48 billion over a decade while adding only $23 billion to direct spending on entitlements and other programs. But the report also said that including the costs of carrying out the new law would actually increase the budget deficit by $18 billion over the decade and several billion a year after that. What’s more, it noted that most of the expected new tax revenue came from new immigrant workers, not from the newly legalized population.

Our history suggests we could have much to gain by turning illegal immigrants into citizens and putting an end to unauthorized immigration. The last time we permitted illegal immigrants to legalize, in 1986, incomes jumped for those who took advantage of the opportunity. Their children became more proficient in English and completed more years of school — becoming more productive and paying more taxes over their lifetimes.

But the same history underscores how immigration sets off fears about further sharing of government resources. Ten years after the immigration reform of 1986, reeling from some public anger, Congress passed a law barring legal immigrants from means-tested government services. The same issue is likely again to be a major flash point. Professor Hanson pointed to “the older white man who sees his entitlements at risk because of the demands placed by legalization on our fiscal resources.”

Conservative Republicans set on cutting government spending share those concerns. And for all their reasons to reach out to Hispanics, they might not find making illegal immigrants legal politically advantageous. On Tuesday, Republicans in the House argued against granting citizenship to illegal immigrants at all.

Hispanics are more liberal than the general population on economic matters, polls suggest, and more supportive of Big Government initiatives. Granting them citizenship would give them the vote.

As Steven A. Camarota, director of research at the Center for Immigration Studies, an advocacy group in Washington that favors more limits on immigration, said, “They will see legalization as a voter-registration drive for Democrats.”

E-mail: eporter@nytimes.com; Twitter: @portereduardo

This article has been revised to reflect the following correction:

Correction: February 5, 2013

An earlier version misspelled the first name of one of the two United States senators from Arizona.  His name is Jon Kyl, not John.

Read More..

Vote This Week May Close Long Island College Hospital

State university trustees will vote this week on whether to close Long Island College Hospital, officials of the Brooklyn hospital said on Tuesday, despite protests from doctors and nurses that northern Brooklyn would lose an essential source of emergency care.

Dr. John Williams, president of SUNY Downstate Medical Center, which runs Long Island College Hospital, said on Tuesday that he would formally recommend closing the hospital at a SUNY meeting in Manhattan on Thursday, followed by a public hearing that same day.

An executive committee of the SUNY board will vote on the recommendation on Friday and is expected to approve it, which would clear the way for the state Health Department to make the final decision, based on whether comparable care is available to people now served by the hospital. About 2,000 doctors, nurses and other employees would be in danger of losing their jobs.

Dr. Williams said that after five months on the job, he had concluded that the financial losses at LICH, as the hospital is called, threatened to sink SUNY Downstate, which includes a medical school that he said had trained one out of three doctors practicing in Brooklyn and one out of nine doctors practicing in New York City.

He said it was necessary to sacrifice LICH to save the rest of the enterprise. “I have to put on the big hat when I look at the campus and say what works and what doesn’t work,” Dr. Williams said in an interview on Tuesday. “The last thing I want to do is have people lose their jobs, but LICH could bring down SUNY Downstate and that’s something I’m trying to prevent.”

But doctors — many of whom heard of the plan at a meeting held Monday by Dr. Williams — said that the closing of LICH would leave more than 50,000 emergency room patients a year without a nearby hospital to go to. They accused Dr. Williams of opting to close LICH, which lies in the gentrifying Cobble Hill neighborhood, rather than more antiquated facilities in East Flatbush or Bay Ridge, because it has the most valuable real estate, and the sale could prop up SUNY Downstate’s faltering operations.

Dr. Williams said that he had chosen to close LICH, rather than facilities in lower-income areas, because Downstate’s mission was to take care of poor and underserved patients. He said that it would cost $75 million to $200 million to upgrade LICH’s aging plant. Besides, he said, in recent years, LICH had been largely abandoned by residents of the surrounding neighborhoods of Cobble Hill, Carroll Gardens, Brooklyn Heights, Red Hook and Boerum Hill, who often worked in Manhattan and preferred to go to hospitals there, forcing the hospital to reduce its beds.

But Julie Semente, a registered nurse in LICH’s intensive care unit, said Tuesday that when it came to emergencies, those patients still went to LICH; Brooklyn ambulances, she said, generally do not go to Manhattan. If LICH closed, she said, they would have to go to hospitals deeper in Brooklyn and farther from their homes and families.

“My patient who was hemorrhaging had to call an ambulance,” Ms. Semente said of one recent patient. “He lives in Brooklyn Heights. The ambulance doesn’t go over the bridge. It came to Long Island College Hospital and his life was saved because he went to the hospital in the neighborhood.”

She said that SUNY Downstate was already “in a mess” financially before acquiring LICH in 2011 from Continuum Health Partners, which also runs St. Luke’s, Roosevelt and Beth Israel hospitals in Manhattan. “LICH is being closed because it is more attractive and it will bring them more money in a sale” than other facilities, she said.

The state comptroller, Thomas P. DiNapoli, said in an audit last month that SUNY Downstate had $117 million in operating losses in 2011, of which $44 million was attributable to the acquisition of LICH. The audit said that LICH had annual operating losses for 17 years going back to 1994. A report in November 2011 by Gov. Andrew M. Cuomo’s panel on Brooklyn hospitals identified LICH as one of six hospitals that “do not have a business model and sufficient margins to remain viable and provide high-quality care to their communities as currently structured.”

Read More..

Vote This Week May Close Long Island College Hospital

State university trustees will vote this week on whether to close Long Island College Hospital, officials of the Brooklyn hospital said on Tuesday, despite protests from doctors and nurses that northern Brooklyn would lose an essential source of emergency care.

Dr. John Williams, president of SUNY Downstate Medical Center, which runs Long Island College Hospital, said on Tuesday that he would formally recommend closing the hospital at a SUNY meeting in Manhattan on Thursday, followed by a public hearing that same day.

An executive committee of the SUNY board will vote on the recommendation on Friday and is expected to approve it, which would clear the way for the state Health Department to make the final decision, based on whether comparable care is available to people now served by the hospital. About 2,000 doctors, nurses and other employees would be in danger of losing their jobs.

Dr. Williams said that after five months on the job, he had concluded that the financial losses at LICH, as the hospital is called, threatened to sink SUNY Downstate, which includes a medical school that he said had trained one out of three doctors practicing in Brooklyn and one out of nine doctors practicing in New York City.

He said it was necessary to sacrifice LICH to save the rest of the enterprise. “I have to put on the big hat when I look at the campus and say what works and what doesn’t work,” Dr. Williams said in an interview on Tuesday. “The last thing I want to do is have people lose their jobs, but LICH could bring down SUNY Downstate and that’s something I’m trying to prevent.”

But doctors — many of whom heard of the plan at a meeting held Monday by Dr. Williams — said that the closing of LICH would leave more than 50,000 emergency room patients a year without a nearby hospital to go to. They accused Dr. Williams of opting to close LICH, which lies in the gentrifying Cobble Hill neighborhood, rather than more antiquated facilities in East Flatbush or Bay Ridge, because it has the most valuable real estate, and the sale could prop up SUNY Downstate’s faltering operations.

Dr. Williams said that he had chosen to close LICH, rather than facilities in lower-income areas, because Downstate’s mission was to take care of poor and underserved patients. He said that it would cost $75 million to $200 million to upgrade LICH’s aging plant. Besides, he said, in recent years, LICH had been largely abandoned by residents of the surrounding neighborhoods of Cobble Hill, Carroll Gardens, Brooklyn Heights, Red Hook and Boerum Hill, who often worked in Manhattan and preferred to go to hospitals there, forcing the hospital to reduce its beds.

But Julie Semente, a registered nurse in LICH’s intensive care unit, said Tuesday that when it came to emergencies, those patients still went to LICH; Brooklyn ambulances, she said, generally do not go to Manhattan. If LICH closed, she said, they would have to go to hospitals deeper in Brooklyn and farther from their homes and families.

“My patient who was hemorrhaging had to call an ambulance,” Ms. Semente said of one recent patient. “He lives in Brooklyn Heights. The ambulance doesn’t go over the bridge. It came to Long Island College Hospital and his life was saved because he went to the hospital in the neighborhood.”

She said that SUNY Downstate was already “in a mess” financially before acquiring LICH in 2011 from Continuum Health Partners, which also runs St. Luke’s, Roosevelt and Beth Israel hospitals in Manhattan. “LICH is being closed because it is more attractive and it will bring them more money in a sale” than other facilities, she said.

The state comptroller, Thomas P. DiNapoli, said in an audit last month that SUNY Downstate had $117 million in operating losses in 2011, of which $44 million was attributable to the acquisition of LICH. The audit said that LICH had annual operating losses for 17 years going back to 1994. A report in November 2011 by Gov. Andrew M. Cuomo’s panel on Brooklyn hospitals identified LICH as one of six hospitals that “do not have a business model and sufficient margins to remain viable and provide high-quality care to their communities as currently structured.”

Read More..

DealBook: Dell Goes Private in $24 Billion Buyout, Largest Since 2007

9:22 p.m. | Updated

For Dell, a $24.4 billion deal to take itself private is a bold move out of Wall Street’s harsh spotlight as it tries to remake itself in a world where personal computers are no longer the big business in technology.

Yet the buyout — which was announced on Tuesday and would be the biggest by far since the days of the recession — is a huge gamble. It will saddle Dell with $15 billion of new debt, and it does nothing to divert the forces reshaping the technology industry and undercutting the company’s business.

Fifteen years ago, Dell made enormous profits from selling customized PCs directly to customers. Six years ago, it was the world’s leading maker of personal computers. Today, it is in third place, behind Hewlett-Packard and Lenovo, and falling.

Dell’s share of an already contracting market for PCs slipped to just 10.7 percent last year, from 16.6 percent six years earlier.

No-name rivals from Taiwan and China grind earnings to razor-thin margins. Android smartphones and iPads, not Windows laptops and desktops, are the best-selling and most moneymaking devices.

And while a shift to cloud computing has increased demand for data centers — an opportunity for Dell to sell servers — big customers like Google and Facebook build their own equipment cheaply. The rise of cloud services has also prompted many companies to forgo buying additional machines, instead relying on rented time and applications running on faraway computer networks.

Dell’s share of the market for servers, slipped about one percentage point, to 22.2 percent of 9.5 million servers sold in 2011. The greater problem in this segment is the pressure on profit margins. Shaw Wu, an analyst with Sterne Agee, estimates operating margins on servers, once about 15 percent, are now “in the high single digits, compared with the mid-single digits for PCs.” It is likely that servers will soon have PC-like margins, he said.

Michael S. Dell is betting his stake in the company and some $700 million of his fortune that he can meet those challenges and turn around a business he started in 1984 in his dormitory room at the University of Texas.

“Dell’s transformation is well under way, but we recognize it will still take more time, investment and patience,” Mr. Dell wrote in a memo to employees on Tuesday. “I believe that we are better served with partners who will provide long-term support to help Dell innovate and accelerate the company’s transformation strategy.”

Mr. Dell’s investment means he will maintain control of the company if its shareholders approve the deal. The private equity firm Silver Lake, one of the most prominent investors in technology companies, is contributing about $1 billion in cash.

And Microsoft, seeking to shore up one of its most important business partners, has agreed to lend Dell $2 billion. Microsoft itself is under pressure, with longtime suppliers flirting with rivals to its Windows operating system.

“Microsoft is committed to the long term success of the entire PC ecosystem and invests heavily in a variety of ways to build that ecosystem for the future,” the software giant said in a statement.

Despite taking on an additional $15 billion in debt, Mr. Dell and Silver Lake argue that the company will survive, thanks to the cash that the PC business still generates.

A. M. Sacconaghi, an analyst with Bernstein Research, estimated that the amount of debt Dell will pay is less than what it has spent in stock dividends and share repurchases. “This debt load is manageable,” he said, “as long as the cash flow from PCs holds up.”

People involved in the transaction said that the buyers had prepared for potential further declines in the PC business, but intend on at least maintaining the company’s position. Dell’s cash from operations has held steady for four of the last five years, coming in at $5.5 billion for the most recent fiscal year.

The size of the transaction evoked the frothy deal-making days before the financial crisis. Dell would be the biggest buyout since the Blackstone Group’s $26 billion takeover of Hilton Hotels in the summer of 2007. Yet few expect a resurgence in giant leveraged buyouts. While the continued availability of cheap financing makes such deals possible, financiers caution that Dell represents a special case because of the founder’s big equity stake.

The deal is the biggest test yet for Mr. Dell, 47, who has a fortune estimated at $16 billion. After a three-year absence, he returned as chief executive of the company in 2007, vowing to restore his creation. His strategy has focused on moving into the business of data centers and corporate software services, marked by numerous acquisitions that have cost billions of dollars.

So far, that has yielded little. Dell’s shares have fallen 31 percent over the last five years, closing on Tuesday at $13.42 — below the buyout’s offer price of $13.65.

But that strategy will largely remain in place if the management buyout is completed. The company will cut its PC offerings further and buy more companies involved in corporate computing for small and medium-size businesses, said Brian T. Gladden, Dell’s chief financial officer.

Though Mr. Dell has bemoaned his company’s dismal stock performance for years, his plan to take it private began in earnest only last year. The billionaire maintains a home in Hawaii near the residences of two prominent private equity executives, Egon Durban of Silver Lake and George R. Roberts of Kohlberg Kravis Roberts, and began floating the idea of a deal with them, people briefed on the matter said.

By August, Mr. Dell formally approached the board with a proposal to take the company private, prompting directors to form a special committee to study alternatives to a deal, these people said. One priority was keeping the process devoid of conflicts of interest to head off potential legal challenges, including the hiring of JPMorgan Chase to provide advice and Evercore Partners to solicit other suitors.

The committee considered ways to keep the company public, including borrowing money to buy back shares, but concluded that the management buyout was the most attractive option.

Mr. Dell had aligned himself with Silver Lake, which he let handle virtually all of the board negotiations, these people said. Mr. Durban used his close ties with Steven Ballmer, the chief executive of Microsoft and to whom he had sold the video chatting service Skype for $8.5 billion, to bring in Microsoft as a partner.

Microsoft was wary of getting involved, fearing fracturing relationships with other partners, according to a person briefed on its deliberations. The software company insisted on providing a loan instead of taking equity in the newly private Dell. Silver Lake also hired four banks to arrange the $15 billion in financing.

By the time word of the deal talks leaked last month, the two sides had the outline of a final proposal. But Dell’s special board committee, led by Alex J. Mandl, battled with the buyers on price until Monday night, pressing for the highest possible bid.

Hamstringing them was a lack of other potential buyers. The committee’s advisers had unsuccessfully approached both K.K.R. and TPG Capital, another big investment firm, hoping to flush out another offer. And despite the talk last month, no strategic buyer emerged as a rival.

Secrecy was important. Mr. Dell was known in talks as “Mr. Denali” — a nickname he liked so much he referred to himself by it regularly — while the PC maker was “Osprey” and Silver Lake was “Salamander.”

Nick Wingfield and Andrew Ross Sorkin contributed reporting.

Read More..

Tsunami Fear After Quake Off Solomons

AUCKLAND, New Zealand — Residents of islands from the South Pacific to Australia were alerted to the possibility of a damaging tsunami on Wednesday after an 8.0-magnitude earthquake off the Solomon Islands, according to scientists and news reports from the area, but the warnings were called off a few hours later.

Edmal Palmer, the chief reporter of the Solomon Star newspaper in Honiara, the capital of the Solomon Islands, said in a telephone interview that reports from Lata, the capital of the Temotu province, were sketchy but indicated that the wave apparently had struck three villages.

“We have heard that a wave 103 centimeters high” — nearly three and a half feet — “has hit Lata, swamping the town, and five people are still missing at the moment,” Mr. Palmer said.

Lata, where the quake struck, is in Temotu Province, where the population is around 30,000. It is a three-hour flight from the Solomons’ capital, Honiara, which was not damaged by the earthquake or tsunami.

Mr. Palmer said Honiara residents were not concerned by the tsunami: “Most of us are getting ready for tonight’s UB40 concert.”

“Sea level readings indicate a tsunami was generated,” the Pacific Tsunami Warning Center said on its Web site. The earthquake struck around 11 a.m. local time in the Santa Cruz Islands, part of the Solomon chain. There were conflicting reports as to the depth of the quake.

The center said the tsunami warning was limited to the Solomon Islands, Vanuatu, Nauru, Papua New Guinea, Tuvalu, New Caledonia, Kosrae, Fiji, Kiribati, Wallis and Futuna.

A lesser alert, a tsunami watch, was declared for American Samoa, Australia, Guam, the Northern Marianas, New Zealand and eastern Indonesia.

The earthquake was not only powerful but also “shallow,” giving it significant potential to do damage, said Barry Hirshorn, a geophysicist with the National Weather Service in Hawaii. Moreover, it was a thrust earthquake, he said, meaning that the sea floor moved up or down, not sideways, contributing to the potential for a dangerous tsunami.

But after the earthquake, as scientists watched to see how far a tsunami might spread, there were few early indications of a major threat beyond the immediate area, Mr. Hirshorn said. A water rise of about three feet had been observed close to the quake, he said, still high enough to be potentially damaging but probably not big enough to threaten distant shores.

In New Zealand, thousands of people were at the beach, swimming in the sea on a glorious summer afternoon on Waitangi Day, a national holiday — quite oblivious to the potential for a tsunami. Tsunami sirens were set off late in the afternoon there, and people in coastal areas were being told to stay off beaches and out of the sea, rivers and estuaries.

The New Zealand Herald reported Wednesday afternoon on its Web site that tsunami sirens in Suva, the capital of Fiji, had been warning people to stay inside or go to higher ground.

The Sydney Morning Herald reported on its Web site Wednesday that the Solomon Islands’ National Disaster Management Office had advised those living in low-lying areas, especially on Makira and Malaita, to move to higher ground.

Read More..