Story first appeared in Politico
The state of Arizona filed a lawsuit Thursday challenging the federal government’s authority to enforce part of the Voting Rights Act of 1965, becoming the first state to challenge the constitutionality of sections of the federal law that bars states from denying or limiting a person’s right to vote based on their race or color.
State Attorney General Tom Horne argues in the suit, which was filed in District of Columbia District Court, that a provision in the law that requires several states including Arizona to get approval from the Justice Department for changes in voting procedures is unconstitutional.
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Horne said the portions of the Voting Rights Act requiring preclearance of all voting changes are either archaic, not based in fact, or subject to completely subjective enforcement based on the whim of federal authorities.
For close to four decades, Arizona and its municipalities have needed to get Justice Department approval for changes to voting procedures, driver’s licenses and school district boundaries. Importantly this year, the federal government must also approve the state’s redistricting efforts.
Horne says Arizona has been subjected to enforcement actions for problems that were either corrected nearly 40 years ago and have not been repeated, or penalized for alleged violations that have no basis in the Constitution, and that needs to stop. Horne has been leading the state’s fight to uphold its tough anti-illegal immigration laws alongside Republican Gov. Jan Brewer.
But Attorney General Eric Holder said that he plans to fight the suit because the Voting Rights Act continues to play a vital role in our society by ensuring that every American has the right to vote and to have that vote counted.
Holder said the Department of Justice will vigorously defend the constitutionality of the Voting Rights Act in this case, as it has done successfully in the past, noting that the provisions for preclearance — which Arizona is challenging as “archaic” — were reauthorized by Congress in 2006 with overwhelming and bipartisan support.
And some Democrats in the state support continued federal scrutiny of the state’s voting procedures and redistricting.
State Sen. Steve Gallardo, a Democrat from Phoenix said there is a reason Arizona is on the list, and that is because they have a history of discrimination, a history of unfairness.
A decade ago, during the last round of redistricting, the Justice Department required the state’s independent redistricting commission to redraw its maps after determining that the new lines would disadvantage Hispanic voters.
Friday, August 26, 2011
Wednesday, August 24, 2011
MORE PEOPLE ASKING FOR DISABILITY
Story first appeared in the Associated Press.
Laid-off workers and aging baby boomers are flooding Social Security's disability program with benefit claims, pushing the financially strapped system toward the brink of insolvency.
Applications are up nearly 50 percent over a decade ago as people with disabilities lose their jobs and can't find new ones in an economy that has shed nearly 7 million jobs.
The stampede for benefits is adding to a growing backlog of applicants - many wait two years or more before their cases are resolved - and worsening the financial problems of a program that's been running in the red for years.
New congressional estimates say the trust fund that supports Social Security disability will run out of money by 2017, leaving the program unable to pay full benefits, unless Congress acts. About two decades later, Social Security's much larger retirement fund is projected to run dry as well.
Much of the focus in Washington has been on fixing Social Security's retirement system. Proposals range from raising the retirement age to means-testing benefits for wealthy retirees. But the disability system is in much worse shape and its problems defy easy solutions.
The trustees who oversee Social Security are urging Congress to shore up the disability system by reallocating money from the retirement program, just as lawmakers did in 1994. That would provide only short-term relief at the expense of weakening the retirement program.
Claims for disability benefits typically increase in a bad economy because many disabled people get laid off and can't find a new job. This year, about 3.3 million people are expected to apply for federal disability benefits. That's 700,000 more than in 2008 and 1 million more than a decade ago.
The disability program is also being hit by an aging population - disability rates rise as people get older - as well as a system that encourages people to apply for more generous disability benefits rather than waiting until they qualify for retirement.
Retirees can get full Social Security benefits at age 66, a threshold gradually rising to 67. Early retirees can get reduced benefits at 62. However, if you qualify for disability, you can get full benefits, based on your work history, even before 62.
Also, people who qualify for Social Security disability automatically get Medicare after two years, even if they are younger than 65, the age when other retirees qualify for the government-run health insurance program.
Congress tried to rein in the disability program in the late 1970s by making it tougher to qualify. The number of people receiving benefits declined for a few years, even during a recession in the early 1980s. Congress, however, reversed course and loosened the criteria, and the rolls were growing again by 1984.
The disability program got into trouble first because of liberalization of eligibility standards in the 1980s, said Charles Blahous, one of the public trustees who oversee Social Security. Then it got another shove into bigger trouble during the recent recession.
Today, about 13.6 million people receive disability benefits through Social Security or Supplemental Security Income. Social Security is for people with substantial work histories, and monthly disability payments average $927. Supplemental Security Income does not require a work history but it has strict limits on income and assets. Monthly SSI payments average $500.
As policymakers work to improve the disability system, they are faced with two major issues: Legitimate applicants often have to wait years to get benefits while many others get payments they don't deserve.
Last year, Social Security detected $1.4 billion in overpayments to disability beneficiaries, mostly to people who got jobs and no longer qualified, according to a recent report by the Government Accountability Office, the investigative arm of Congress.
Congress is targeting overpayments.
The deficit reduction package enacted this month would allow Congress to boost Social Security's budget by about $4 billion over the next decade to invest in programs that identify people who no longer qualify for disability benefits. The Congressional Budget Office estimates that increased enforcement would save nearly $12 billion over the next decade.
At the same time, the application process can be a nightmare for legitimate applicants. About two-thirds of initial applications are rejected. Most of these people drop their claims, but for those willing go through an appeals process that can take two years or more, chances are good they eventually will get benefits.
Astrue has pledged to reduce processing times for applicants' appeals, and he has had some success, even as the number of claims skyrockets. The number of people waiting for decisions has increased, but their wait times are going down.
Astrue said it's ludicrous to say that the backlog problem is getting worse. Astrue says the backlog problem has gotten dramatically better.
Patricia L. Foster said she was working as a nurse in a hospital in Columbia, S.C., in 2005 when she was attacked by a patient who was suffering from a mental illness. Foster, 64, said she injured her neck so bad she had a plate inserted. She said she also suffers from post-traumatic stress disorder.
Foster was turned down twice for Social Security disability benefits before finally getting them in 2009, after hiring an Illinois-based company, Allsup, to represent her. She said she was awarded retroactive benefits, though the process was demeaning.
Laid-off workers and aging baby boomers are flooding Social Security's disability program with benefit claims, pushing the financially strapped system toward the brink of insolvency.
Applications are up nearly 50 percent over a decade ago as people with disabilities lose their jobs and can't find new ones in an economy that has shed nearly 7 million jobs.
The stampede for benefits is adding to a growing backlog of applicants - many wait two years or more before their cases are resolved - and worsening the financial problems of a program that's been running in the red for years.
New congressional estimates say the trust fund that supports Social Security disability will run out of money by 2017, leaving the program unable to pay full benefits, unless Congress acts. About two decades later, Social Security's much larger retirement fund is projected to run dry as well.
Much of the focus in Washington has been on fixing Social Security's retirement system. Proposals range from raising the retirement age to means-testing benefits for wealthy retirees. But the disability system is in much worse shape and its problems defy easy solutions.
The trustees who oversee Social Security are urging Congress to shore up the disability system by reallocating money from the retirement program, just as lawmakers did in 1994. That would provide only short-term relief at the expense of weakening the retirement program.
Claims for disability benefits typically increase in a bad economy because many disabled people get laid off and can't find a new job. This year, about 3.3 million people are expected to apply for federal disability benefits. That's 700,000 more than in 2008 and 1 million more than a decade ago.
The disability program is also being hit by an aging population - disability rates rise as people get older - as well as a system that encourages people to apply for more generous disability benefits rather than waiting until they qualify for retirement.
Retirees can get full Social Security benefits at age 66, a threshold gradually rising to 67. Early retirees can get reduced benefits at 62. However, if you qualify for disability, you can get full benefits, based on your work history, even before 62.
Also, people who qualify for Social Security disability automatically get Medicare after two years, even if they are younger than 65, the age when other retirees qualify for the government-run health insurance program.
Congress tried to rein in the disability program in the late 1970s by making it tougher to qualify. The number of people receiving benefits declined for a few years, even during a recession in the early 1980s. Congress, however, reversed course and loosened the criteria, and the rolls were growing again by 1984.
The disability program got into trouble first because of liberalization of eligibility standards in the 1980s, said Charles Blahous, one of the public trustees who oversee Social Security. Then it got another shove into bigger trouble during the recent recession.
Today, about 13.6 million people receive disability benefits through Social Security or Supplemental Security Income. Social Security is for people with substantial work histories, and monthly disability payments average $927. Supplemental Security Income does not require a work history but it has strict limits on income and assets. Monthly SSI payments average $500.
As policymakers work to improve the disability system, they are faced with two major issues: Legitimate applicants often have to wait years to get benefits while many others get payments they don't deserve.
Last year, Social Security detected $1.4 billion in overpayments to disability beneficiaries, mostly to people who got jobs and no longer qualified, according to a recent report by the Government Accountability Office, the investigative arm of Congress.
Congress is targeting overpayments.
The deficit reduction package enacted this month would allow Congress to boost Social Security's budget by about $4 billion over the next decade to invest in programs that identify people who no longer qualify for disability benefits. The Congressional Budget Office estimates that increased enforcement would save nearly $12 billion over the next decade.
At the same time, the application process can be a nightmare for legitimate applicants. About two-thirds of initial applications are rejected. Most of these people drop their claims, but for those willing go through an appeals process that can take two years or more, chances are good they eventually will get benefits.
Astrue has pledged to reduce processing times for applicants' appeals, and he has had some success, even as the number of claims skyrockets. The number of people waiting for decisions has increased, but their wait times are going down.
Astrue said it's ludicrous to say that the backlog problem is getting worse. Astrue says the backlog problem has gotten dramatically better.
Patricia L. Foster said she was working as a nurse in a hospital in Columbia, S.C., in 2005 when she was attacked by a patient who was suffering from a mental illness. Foster, 64, said she injured her neck so bad she had a plate inserted. She said she also suffers from post-traumatic stress disorder.
Foster was turned down twice for Social Security disability benefits before finally getting them in 2009, after hiring an Illinois-based company, Allsup, to represent her. She said she was awarded retroactive benefits, though the process was demeaning.
Match.com Is Sued For Allowing Sex Offenders As Its Members
Story first appeared on the Associated Press.
A woman who sued Match.com after being sexually assaulted by a man she met on the dating website settled her lawsuit on Tuesday when she saw proof that the site was screening its members for sexual predators.
Carole Markin sued the website when she found out her attacker had been convicted of sexual battery. She did not seek monetary damages in her lawsuit, just a court order requiring the site to check its members' backgrounds to weed out convicted sex offenders.
Markin said that I shed can save one woman from being attacked, she is happy, and she went into this lawsuit to protect other people, and it worked.
Robert Platt, an attorney for the site, said Match.com has begun checking its members against state and federal sex-offender databases.
Last week Alan Wurtzel, 67, pleaded no contest to assaulting Markin. He could face a year in jail, five years of probation and a lifetime registration as a sex offender when he is sentenced Sept. 19.
Prosecutors said that on their second date last year, Wurtzel drove Markin to her home and followed her inside where he sexually assaulted her while holding her down.
A woman who sued Match.com after being sexually assaulted by a man she met on the dating website settled her lawsuit on Tuesday when she saw proof that the site was screening its members for sexual predators.
Carole Markin sued the website when she found out her attacker had been convicted of sexual battery. She did not seek monetary damages in her lawsuit, just a court order requiring the site to check its members' backgrounds to weed out convicted sex offenders.
Markin said that I shed can save one woman from being attacked, she is happy, and she went into this lawsuit to protect other people, and it worked.
Robert Platt, an attorney for the site, said Match.com has begun checking its members against state and federal sex-offender databases.
Last week Alan Wurtzel, 67, pleaded no contest to assaulting Markin. He could face a year in jail, five years of probation and a lifetime registration as a sex offender when he is sentenced Sept. 19.
Prosecutors said that on their second date last year, Wurtzel drove Markin to her home and followed her inside where he sexually assaulted her while holding her down.
Medical Malpractice Cases Don’t Pay As Often As Everyone Thinks
Story first appeared in the Associated Press.
Only 1 in 5 malpractice claims against doctors leads to a settlement or other payout, according to the most comprehensive study of these claims in two decades.
But while doctors and their insurers may be winning most of these challenges, that's still a lot of fighting. Each year about 1 in 14 doctors is the target of a claim, and most physicians and virtually every surgeon will face at least one in their careers, the study found.
Malpractice cases carry a significant emotional cost for doctors, said study co-author Amitabh Chandra, an economist and professor of public policy at the Harvard Kennedy School of Government. He said they hate having their name dragged through the local newspaper and having to go to court. A Michigan medical malpractice lawyer agreed.
The study might seem to support a common opinion among doctors that most malpractice lawsuits are baseless, but the authors said the truth is more complicated than that.
They noted influential earlier research in New York state concluding that just a tiny fraction of the patients harmed by medical mistakes actually file claims.
Trial lawyers say cost is a barrier to bringing a claim to court. There are very high up-front costs for hiring expert witnesses and preparing a case. Doctors, hospitals and their insurers often have significant money and legal firepower. Some states also have caps on malpractice awards. So, usually, only very strong cases with high expected payouts are pursued.
Given the expense and other difficulties involved in winning, it's doubtful most claims are filed on a greedy whim, the researchers said.
The study was published online Wednesday by the New England Journal of Medicine.
The research team turned to one of the nation's largest national malpractice insurers, analyzing data for about 41,000 physicians who bought coverage from 1991-2005. The researchers could only get the data by signing an agreement not to identify the insurer, so they wouldn't disclose the name of the company.
The insurer represents only about 3 percent of the nation's doctors, but it operates in all 50 states. The average payouts were about the same as seen in the government-created National Practitioner Data Bank, which records payouts but doesn't record all claims filed.
The study found:
-About 7.5 percent of doctors have a claim filed against them each year. That finding is a little higher than a recent American Medical Association survey, in which 5 percent of doctors said they had dealt with a malpractice claim in the previous year.
-Fewer than 2 percent of doctors each year were the subject of a successful claim, in which the insurer had to pay a settlement or court judgment.
-Some types of doctors were sued more than others. About 19 percent of neurosurgeons and heart surgeons were sued every year, making them the most targeted specialties. Pediatricians and psychiatrists were sued the least, with only about 3 percent of them facing a claim each year.
-When pediatricians did pay a claim, it was much more than other doctors. The average pediatric claim was more than $520,000, while the average was about $275,000.
Experts say jurors' hearts cry out for injured patients, especially when kids are involved, and the amount attached to a pediatric case also rises because many more years of suffering are involved than if the victim is middle-aged or elderly.
The study was funded by the RAND Institute for Civil Justice. Chandra also received funding from the National Institute on Aging, which has been interested in malpractice as a possible driver of health-care costs.
The study echoes earlier research on which specialists get sued most often, said Dr. Sidney Wolfe, director of Public Citizen's Health Research Group, a Washington, D.C.-based consumer advocacy group. He said the thing that's disappointing about their study is they don't focus on what can be done to prevent people from being injured.
Only 1 in 5 malpractice claims against doctors leads to a settlement or other payout, according to the most comprehensive study of these claims in two decades.
But while doctors and their insurers may be winning most of these challenges, that's still a lot of fighting. Each year about 1 in 14 doctors is the target of a claim, and most physicians and virtually every surgeon will face at least one in their careers, the study found.
Malpractice cases carry a significant emotional cost for doctors, said study co-author Amitabh Chandra, an economist and professor of public policy at the Harvard Kennedy School of Government. He said they hate having their name dragged through the local newspaper and having to go to court. A Michigan medical malpractice lawyer agreed.
The study might seem to support a common opinion among doctors that most malpractice lawsuits are baseless, but the authors said the truth is more complicated than that.
They noted influential earlier research in New York state concluding that just a tiny fraction of the patients harmed by medical mistakes actually file claims.
Trial lawyers say cost is a barrier to bringing a claim to court. There are very high up-front costs for hiring expert witnesses and preparing a case. Doctors, hospitals and their insurers often have significant money and legal firepower. Some states also have caps on malpractice awards. So, usually, only very strong cases with high expected payouts are pursued.
Given the expense and other difficulties involved in winning, it's doubtful most claims are filed on a greedy whim, the researchers said.
The study was published online Wednesday by the New England Journal of Medicine.
The research team turned to one of the nation's largest national malpractice insurers, analyzing data for about 41,000 physicians who bought coverage from 1991-2005. The researchers could only get the data by signing an agreement not to identify the insurer, so they wouldn't disclose the name of the company.
The insurer represents only about 3 percent of the nation's doctors, but it operates in all 50 states. The average payouts were about the same as seen in the government-created National Practitioner Data Bank, which records payouts but doesn't record all claims filed.
The study found:
-About 7.5 percent of doctors have a claim filed against them each year. That finding is a little higher than a recent American Medical Association survey, in which 5 percent of doctors said they had dealt with a malpractice claim in the previous year.
-Fewer than 2 percent of doctors each year were the subject of a successful claim, in which the insurer had to pay a settlement or court judgment.
-Some types of doctors were sued more than others. About 19 percent of neurosurgeons and heart surgeons were sued every year, making them the most targeted specialties. Pediatricians and psychiatrists were sued the least, with only about 3 percent of them facing a claim each year.
-When pediatricians did pay a claim, it was much more than other doctors. The average pediatric claim was more than $520,000, while the average was about $275,000.
Experts say jurors' hearts cry out for injured patients, especially when kids are involved, and the amount attached to a pediatric case also rises because many more years of suffering are involved than if the victim is middle-aged or elderly.
The study was funded by the RAND Institute for Civil Justice. Chandra also received funding from the National Institute on Aging, which has been interested in malpractice as a possible driver of health-care costs.
The study echoes earlier research on which specialists get sued most often, said Dr. Sidney Wolfe, director of Public Citizen's Health Research Group, a Washington, D.C.-based consumer advocacy group. He said the thing that's disappointing about their study is they don't focus on what can be done to prevent people from being injured.
Tuesday, August 23, 2011
WORK-LIFE BALANCE IS NOT A LAW
Story first appeared in The New York Times.
A few pages from the end of a 64-page legal decision dismissing claims that Bloomberg L.P. had engaged in a pattern of discrimination against new mothers and mothers-to-be, Judge Loretta A. Preska set aside the legalese to offer some blunt remarks on a topic dear to the hearts of many working parents (and those who choose not to be).
She wrote that the law does not mandate “work-life balance,” and in a company like Bloomberg, which explicitly makes all-out dedication its expectation, making a decision that preferences family over work comes with consequences.
With those words and others like them, Judge Preska, of United States District Court in Manhattan, rekindled a debate about how far companies should go in accommodating mothers in the workplace.
Some civil rights groups criticized the ruling as a throwback that reinforced outdated attitudes toward women and corporate culture. But some in business and law said the judge had simply offered a plain-spoken dose of reality.
The New York chapter of the National Organization for Women quickly made clear its dismay, summing up its reaction on Twitter saying Manhattan judge rules if a woman chooses motherhood, she chooses to be discriminated against. The executive director of the group, said in an interview that Judge Preska’s words were really going to inflame people.
She said she felt that the judge certainly has a fundamental misunderstanding of how discrimination plays out for working mothers, and she hardly hides her contempt for women with kids who have ambition and want top-paying jobs. She added that if you read her comments, she says that basically if a workplace culture is work 24/7, then they have a right to have that type of culture.”
Executive director of the New York Civil Liberties Union, said the judge’s comments seemed out of step with the times, and it feels like a throwback to the era when women were forced to choose between work and family — an era that she had hoped we had graduated from.
The president of the Partnership for New York City, a business coalition that includes Bloomberg L.P., said the judge’s remarks rang true. She said she is among the first generation of “liberated” women professionals who took for granted we would have to sacrifice personal time and family life to achieve our professional goals. Younger women tend to assume equality in the workplace, along with the notion that they can and should have it all, and she doesn’t think that is possible for men or women, and certainly not in the competitive environment of New York City.
Debra L. Raskin, a partner at Vladeck, Waldman, Elias & Engelhard, a law firm that represents employees in workplace matters, said that on the basic question of whether the law mandates work-life balance, the judge had it right. She commented that much to her chagrin, there is no duty, unfortunately, to accommodate people’s children or child-care needs other than unpaid leave under the F.M.L.A. She added that this is not France, with two years of maternity leave and the right to go back to your job, instead it’s American individualism, and if an employer says I want you to work 90 hours a week, as long as they comply with overtime requirements, it’s perfectly kosher.
Judge Preska’s ruling came in response to a class-action lawsuit filed in 2007 by the federal Equal Employment Opportunity Commission, charging that Bloomberg L.P., the financial and media services giant founded by Mayor Michael R. Bloomberg, had engaged in a pattern or practice of discrimination against pregnant women and those who had returned from maternity leave. The accusations relate to incidents that took place after Mr. Bloomberg, the majority shareholder of the company, left his day-to-day role there.
The judge found that even if there were several isolated instances of individual discrimination, the commission had insufficient evidence to prove that discrimination was the company’s standard operating procedure.”
Gillian Thomas, a trial lawyer at the Equal Employment Opportunity Commission, said Thursday that the discrimination claims brought by individual Bloomberg employees remain alive, adding that as the judge noted, many of them experienced discrimination, even if she didn’t think it happened on a classwide basis. Asked if the commission would appeal the judge’s ruling, Ms. Thomas said they are assessing their options.
Judge Preska declined to comment, as did a spokesman for Bloomberg L.P.
A few pages from the end of a 64-page legal decision dismissing claims that Bloomberg L.P. had engaged in a pattern of discrimination against new mothers and mothers-to-be, Judge Loretta A. Preska set aside the legalese to offer some blunt remarks on a topic dear to the hearts of many working parents (and those who choose not to be).
She wrote that the law does not mandate “work-life balance,” and in a company like Bloomberg, which explicitly makes all-out dedication its expectation, making a decision that preferences family over work comes with consequences.
With those words and others like them, Judge Preska, of United States District Court in Manhattan, rekindled a debate about how far companies should go in accommodating mothers in the workplace.
Some civil rights groups criticized the ruling as a throwback that reinforced outdated attitudes toward women and corporate culture. But some in business and law said the judge had simply offered a plain-spoken dose of reality.
The New York chapter of the National Organization for Women quickly made clear its dismay, summing up its reaction on Twitter saying Manhattan judge rules if a woman chooses motherhood, she chooses to be discriminated against. The executive director of the group, said in an interview that Judge Preska’s words were really going to inflame people.
She said she felt that the judge certainly has a fundamental misunderstanding of how discrimination plays out for working mothers, and she hardly hides her contempt for women with kids who have ambition and want top-paying jobs. She added that if you read her comments, she says that basically if a workplace culture is work 24/7, then they have a right to have that type of culture.”
Executive director of the New York Civil Liberties Union, said the judge’s comments seemed out of step with the times, and it feels like a throwback to the era when women were forced to choose between work and family — an era that she had hoped we had graduated from.
The president of the Partnership for New York City, a business coalition that includes Bloomberg L.P., said the judge’s remarks rang true. She said she is among the first generation of “liberated” women professionals who took for granted we would have to sacrifice personal time and family life to achieve our professional goals. Younger women tend to assume equality in the workplace, along with the notion that they can and should have it all, and she doesn’t think that is possible for men or women, and certainly not in the competitive environment of New York City.
Debra L. Raskin, a partner at Vladeck, Waldman, Elias & Engelhard, a law firm that represents employees in workplace matters, said that on the basic question of whether the law mandates work-life balance, the judge had it right. She commented that much to her chagrin, there is no duty, unfortunately, to accommodate people’s children or child-care needs other than unpaid leave under the F.M.L.A. She added that this is not France, with two years of maternity leave and the right to go back to your job, instead it’s American individualism, and if an employer says I want you to work 90 hours a week, as long as they comply with overtime requirements, it’s perfectly kosher.
Judge Preska’s ruling came in response to a class-action lawsuit filed in 2007 by the federal Equal Employment Opportunity Commission, charging that Bloomberg L.P., the financial and media services giant founded by Mayor Michael R. Bloomberg, had engaged in a pattern or practice of discrimination against pregnant women and those who had returned from maternity leave. The accusations relate to incidents that took place after Mr. Bloomberg, the majority shareholder of the company, left his day-to-day role there.
The judge found that even if there were several isolated instances of individual discrimination, the commission had insufficient evidence to prove that discrimination was the company’s standard operating procedure.”
Gillian Thomas, a trial lawyer at the Equal Employment Opportunity Commission, said Thursday that the discrimination claims brought by individual Bloomberg employees remain alive, adding that as the judge noted, many of them experienced discrimination, even if she didn’t think it happened on a classwide basis. Asked if the commission would appeal the judge’s ruling, Ms. Thomas said they are assessing their options.
Judge Preska declined to comment, as did a spokesman for Bloomberg L.P.
Thursday, August 18, 2011
STANDARD AND POOR UNDER INVESTIGATION
Story first appeared in the New York Times.
The Justice Department is investigating whether the nation’s largest credit ratings agency, Standard & Poor’s, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to two people interviewed by the government and another briefed on such interviews.
The investigation began before Standard & Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations.
In the mortgage inquiry, the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers, according to the people with knowledge of the interviews. If the government finds enough evidence to support such a case, which is likely to be a civil case, it could undercut S.& P.’s longstanding claim that its analysts act independently from business concerns.
It is unclear if the Justice Department investigation involves the other two ratings agencies, Moody’s and Fitch, or only S.& P.
During the boom years, S.& P. and other ratings agencies reaped record profits as they bestowed their highest ratings on bundles of troubled mortgage loans, which made the mortgages appear less risky and thus more valuable. They failed to anticipate the deterioration that would come in the housing market and devastate the financial system.
Since the crisis, the agencies’ business practices and models have been criticized from many corners, including in Congressional hearings and reports that have raised questions about whether independent analysis was corrupted by the drive for profits.
The Securities and Exchange Commission has also been investigating possible wrongdoing at S.& P., according to a person interviewed on that matter, and may be looking at the other two major agencies, Moody’s and Fitch Ratings.
Ed Sweeney, a spokesman for S.& P., said S.& P. has received several requests from different government agencies over the last few years, and that they continue to cooperate with these requests. He added that they do not prevent such agencies from speaking with current or former employees and that S.& P. is a unit of the McGraw-Hill Companies, which is under pressure from some investors and has been considering whether to spin off businesses or make other strategic changes this summer.
The people with knowledge of the investigation said it had picked up steam early this summer, well before the debt rating issue reached a high pitch in Washington. Now members of Congress are investigating why S.& P. removed the nation’s AAA rating, which is highly important to financial markets.
Representatives of the Justice Department and the S.E.C. declined to comment, as is customary for those departments, on whether they are investigating the ratings agencies.
Even though the Justice Department has the power to bring criminal charges, witnesses who have been interviewed have been told by investigators that they are pursuing a civil case.
The government has brought relatively few cases against large financial concerns for their roles in the housing blowup, and it has closed investigations into Washington Mutual and Countrywide, among others, without taking action.
The cases that have been brought are mainly civil matters. In the spring, the Justice Department filed a civil suit against Deutsche Bank and one of its units, which the government said had misrepresented the quality of mortgage loans to obtain government insurance on them. Another common thread — in that case and several others — is that no bank executives were named.
Despite the public scrutiny and outcry over the ratings agencies’ failures in the financial crisis, many investors still rely heavily on ratings from the three main agencies for their purchases of sovereign and corporate debt, as well as other complex financial products.
Companies and some countries — but not the United States — pay the agencies to receive a rating, the financial market’s version of a seal of approval. For decades, the government issued rules that banks, mutual funds and others could rely on a AAA stamp for investing decisions — which bolstered the agencies’ power.
A successful case or settlement against a giant like S.& P. could accelerate the shift away from the traditional ratings system. The financial reform overhaul known as Dodd-Frank sought to decrease the emphasis on ratings in the way banks and mutual funds invest their assets. But bank regulators have been slow to spell out how that would work. A government case that showed problems beyond ineptitude might spur greater reforms, financial historians said.
Richard Sylla, a professor at New York University’s Stern School of Business who has studied the history of ratings firms, said he thinks it would have a major impact if there was a successful fraud case that would suggest there would be momentum for legislation that would force them to change their business model.
In particular, Professor Sylla said that the ratings agencies could be forced to stop making their money off the entities they rate and instead charge investors who use the ratings. The current business model, critics say, is riddled with conflicts of interest, since ratings agencies might make their grades more positive to please their customers.
Before the financial crisis, banks shopped around to make sure rating agencies would award favorable ratings before agreeing to work with them. These banks paid upward of $100,000 for ratings on mortgage bond deals, according to the Financial Crisis Inquiry Commission, and several hundreds of thousands of dollars for the more complex structures known as collateralized debt obligations.
Ratings experts also said that a successful case could hamper the agencies’ ability to argue that they were not liable for ratings that turned out to be wrong.
Lawrence J. White, another professor at New York University’s Stern School of Business, who has testified alongside ratings executives before Congress, said their story is that they should be protected by full First Amendment protections, and that would be harder to make in the public arena, in Congress and in the courts. Also, if they mixed business and the ratings, it would certainly make their story harder to tell.
The ratings agencies lost a bit of ground on their First Amendment protections in the recent financial reform bill, which put the ratings firms on the same legal liability level as accounting firms, Professor White said. But that has yet to be tested in court.
People with knowledge of the Justice Department investigation of S.& P. said investigators had made references to several individuals, though it was unclear if anyone would be named in any potential case. Investigators have been asking about a remark supposedly made by David Tesher about mortgage security ratings, two people said. The investigators have asked witnesses if they heard Mr. Tesher say: “Don’t kill the golden goose,” in reference to mortgage securities.
S.& P. declined to provide a comment for Mr. Tesher.
Several of the people who oversaw S.& P.’s mortgage-related ratings went on to different jobs at McGraw-Hill, including Joanne Rose, the former head of structured finance; Vickie Tillman, the former head of ratings; and Susan Barnes, former head of residential mortgage bond ratings. Investigators have told witnesses that they are looking for former employees and that has proved difficult because so many crucial people still work at the company.
One former executive who has been mentioned in investigators’ interviews is Richard Gugliada, who helped oversee ratings of collateralized debt obligations. Calls to his home were not returned.
The Justice Department is investigating whether the nation’s largest credit ratings agency, Standard & Poor’s, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to two people interviewed by the government and another briefed on such interviews.
The investigation began before Standard & Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations.
In the mortgage inquiry, the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers, according to the people with knowledge of the interviews. If the government finds enough evidence to support such a case, which is likely to be a civil case, it could undercut S.& P.’s longstanding claim that its analysts act independently from business concerns.
It is unclear if the Justice Department investigation involves the other two ratings agencies, Moody’s and Fitch, or only S.& P.
During the boom years, S.& P. and other ratings agencies reaped record profits as they bestowed their highest ratings on bundles of troubled mortgage loans, which made the mortgages appear less risky and thus more valuable. They failed to anticipate the deterioration that would come in the housing market and devastate the financial system.
Since the crisis, the agencies’ business practices and models have been criticized from many corners, including in Congressional hearings and reports that have raised questions about whether independent analysis was corrupted by the drive for profits.
The Securities and Exchange Commission has also been investigating possible wrongdoing at S.& P., according to a person interviewed on that matter, and may be looking at the other two major agencies, Moody’s and Fitch Ratings.
Ed Sweeney, a spokesman for S.& P., said S.& P. has received several requests from different government agencies over the last few years, and that they continue to cooperate with these requests. He added that they do not prevent such agencies from speaking with current or former employees and that S.& P. is a unit of the McGraw-Hill Companies, which is under pressure from some investors and has been considering whether to spin off businesses or make other strategic changes this summer.
The people with knowledge of the investigation said it had picked up steam early this summer, well before the debt rating issue reached a high pitch in Washington. Now members of Congress are investigating why S.& P. removed the nation’s AAA rating, which is highly important to financial markets.
Representatives of the Justice Department and the S.E.C. declined to comment, as is customary for those departments, on whether they are investigating the ratings agencies.
Even though the Justice Department has the power to bring criminal charges, witnesses who have been interviewed have been told by investigators that they are pursuing a civil case.
The government has brought relatively few cases against large financial concerns for their roles in the housing blowup, and it has closed investigations into Washington Mutual and Countrywide, among others, without taking action.
The cases that have been brought are mainly civil matters. In the spring, the Justice Department filed a civil suit against Deutsche Bank and one of its units, which the government said had misrepresented the quality of mortgage loans to obtain government insurance on them. Another common thread — in that case and several others — is that no bank executives were named.
Despite the public scrutiny and outcry over the ratings agencies’ failures in the financial crisis, many investors still rely heavily on ratings from the three main agencies for their purchases of sovereign and corporate debt, as well as other complex financial products.
Companies and some countries — but not the United States — pay the agencies to receive a rating, the financial market’s version of a seal of approval. For decades, the government issued rules that banks, mutual funds and others could rely on a AAA stamp for investing decisions — which bolstered the agencies’ power.
A successful case or settlement against a giant like S.& P. could accelerate the shift away from the traditional ratings system. The financial reform overhaul known as Dodd-Frank sought to decrease the emphasis on ratings in the way banks and mutual funds invest their assets. But bank regulators have been slow to spell out how that would work. A government case that showed problems beyond ineptitude might spur greater reforms, financial historians said.
Richard Sylla, a professor at New York University’s Stern School of Business who has studied the history of ratings firms, said he thinks it would have a major impact if there was a successful fraud case that would suggest there would be momentum for legislation that would force them to change their business model.
In particular, Professor Sylla said that the ratings agencies could be forced to stop making their money off the entities they rate and instead charge investors who use the ratings. The current business model, critics say, is riddled with conflicts of interest, since ratings agencies might make their grades more positive to please their customers.
Before the financial crisis, banks shopped around to make sure rating agencies would award favorable ratings before agreeing to work with them. These banks paid upward of $100,000 for ratings on mortgage bond deals, according to the Financial Crisis Inquiry Commission, and several hundreds of thousands of dollars for the more complex structures known as collateralized debt obligations.
Ratings experts also said that a successful case could hamper the agencies’ ability to argue that they were not liable for ratings that turned out to be wrong.
Lawrence J. White, another professor at New York University’s Stern School of Business, who has testified alongside ratings executives before Congress, said their story is that they should be protected by full First Amendment protections, and that would be harder to make in the public arena, in Congress and in the courts. Also, if they mixed business and the ratings, it would certainly make their story harder to tell.
The ratings agencies lost a bit of ground on their First Amendment protections in the recent financial reform bill, which put the ratings firms on the same legal liability level as accounting firms, Professor White said. But that has yet to be tested in court.
People with knowledge of the Justice Department investigation of S.& P. said investigators had made references to several individuals, though it was unclear if anyone would be named in any potential case. Investigators have been asking about a remark supposedly made by David Tesher about mortgage security ratings, two people said. The investigators have asked witnesses if they heard Mr. Tesher say: “Don’t kill the golden goose,” in reference to mortgage securities.
S.& P. declined to provide a comment for Mr. Tesher.
Several of the people who oversaw S.& P.’s mortgage-related ratings went on to different jobs at McGraw-Hill, including Joanne Rose, the former head of structured finance; Vickie Tillman, the former head of ratings; and Susan Barnes, former head of residential mortgage bond ratings. Investigators have told witnesses that they are looking for former employees and that has proved difficult because so many crucial people still work at the company.
One former executive who has been mentioned in investigators’ interviews is Richard Gugliada, who helped oversee ratings of collateralized debt obligations. Calls to his home were not returned.
NEW CORPORATE WHISTLE-BLOWER PROGRAM UNDER FIRE
Original Article by New York Times.
A new front has opened in the behind-the-scenes battle over financial regulation.
Industry groups have been examining legal challenges to the Securities and Exchange Commission’s new corporate whistle-blower program and a provision surrounding the extraction of oil and natural gas from foreign countries, people briefed on the talks said. The Commodity Futures Trading Commission’s plan to curb speculative trading is also under fire.
The catalyst has been a federal appeals court decision in July striking down an S.E.C. rule that would have made it easier for shareholders to nominate company directors. The so-called proxy access rule stemmed from the Dodd-Frank act, the sweeping regulatory overhaul enacted in the wake of the financial crisis.
In recent weeks, lawyers and Wall Street trade groups have gathered in Washington to ponder the next big case. Lawyers branded one meeting, held by the United States Chamber of Commerce, as “Dodd-Frank Excesses,” according to two people who were notified of the meeting.
Until now, Wall Street relied largely on an army of lobbyists to chisel away at 300 new rules flowing from the S.E.C. and the Commodity Futures Trading Commission, among other agencies. But while lobbying might yield the occasional loophole, judicial rulings can halt new rules altogether.
The lawyer who won the proxy case on behalf of the Chamber of Commerce said he would hope the agencies are taking to heart the potential consequences for Dodd-Frank rules.
Hal S. Scott, a professor at Harvard Law School and a director of the Committee on Capital Markets Regulation, a research group that has been a critic of Dodd-Frank, said he does see lots of challenges coming down the pike.
Regulators, reluctant to give in to industry pressure, are rushing to safeguard their rules from legal action. The commodity commission, having already delayed several Dodd-Frank rules for six months, is now studying the proxy case and considering adjustments to some proposed regulations, according to a person close to the agency. Earlier this month, the agency dispatched several staff members to meet with S.E.C. officials about the recent court decision.
For its part, the S.E.C. is weighing an appeal of the proxy ruling. The S.E.C. is also adding economists, planning to hire eight over the next two years, after the appeals court rebuked the agency for not fully evaluating the proxy rule’s economic effects.
The legal challenges are rooted in a 1996 law that requires the S.E.C. to promote efficiency, competition and capital formation. The law enabled the financial industry to build lawsuits around the economic costs of a rule, regardless of its merits.
In 2005, the Chamber of Commerce was the first business group to invoke the law, using it to successfully challenge certain S.E.C. rules for the mutual fund industry. The chamber later gained momentum with a string of similar victories in the United States Court of Appeals for the District of Columbia Circuit. Altogether, the appeals court has tossed out three financial regulations in the last six years, including the proxy rule.
Mr. Scalia, a partner at the law firm Gibson Dunn and the son of Supreme Court Justice Antonin Scalia, was on the winning end of each case.
Banks and corporations, rather than challenging the rules directly at the risk of alienating regulators, turn to seasoned litigators like Mr. Scalia and influential trade groups like the Chamber of Commerce to lead the fight. For more than 30 years, the chamber has had a separate litigation center, which operates as its own law firm in Washington.
The S.E.C.’s former general counsel who now works at the law firm Latham & Watkins sai it is usually not in the interest of a single business to mount a claim, and that you need some cut-out man or organization that speaks for broad groups.
The industry has shied from mounting a broader challenge to Dodd-Frank itself, finding it cheaper and easier to gradually chip away at the law’s fiercest provisions. Lawyers say a single lawsuit contesting the constitutionality of Dodd-Frank could take years — and millions of dollars — to wind through the courts, with little chance of succeeding.
By some measures, the proxy rule was an unlikely choice to challenge on economic grounds. The S.E.C. produced 60 pages on a cost-benefit analysis of the rule and spent 21,000 staff hours drafting it over two years, Mary L. Schapiro, the agency’s chairwoman, said in a recent letter to Congress.
That the proxy regulation still did not pass muster does not bode well for several other Dodd-Frank rules that received considerably less explication, sometimes only 25 pages, on their economic effects.
Financial trade groups, according to several lawyers, are now considering suits against the S.E.C.’s corporate whistle-blower office, which opened last week. The chamber, at least, argues that the whistle-blower program allows tipsters to undermine internal compliance departments.
Industry groups are also looking at claims against a few more obscure Dodd-Frank provisions. One S.E.C. regulation requires companies to disclose whether they manufacture goods using so-called conflict minerals like gold from Congo.
Tiffany & Company argued in a letter to the S.E.C. that the proposed rules “would violate the First Amendment,” laying the groundwork for business groups to mount a constitutional challenge.
Some letters are even blunter, as groups invoke the proxy case as a cautionary tale.
Royal Dutch Shell wrote the S.E.C. this month about our expected costs stemming from a proposal about oil extraction. Shell filed the letter, it said, in light of the recent decision by the U.S. Court of Appeals.
The commodity commission has received a barrage of hostile letters, too, some foreshadowing legal action. In March, the Futures Industry Association urged the commission to scrap its plan for reining in speculative commodities trading, saying it may be legally infirm.
Bart Chilton, a Democratic commissioner at the agency who has championed tough position limits on oil, corn and the like, sought feedback on the plan from the CME Group, the nation’s largest futures exchange. But at CME’s Chicago headquarters last fall, executives declined to discuss the proposal with Mr. Chilton, saying the Commodity Futures Trading Commission lacked the legal authority to impose trading limits.
With the industry firing such warning shots, regulators have spent months shielding their rules from litigation.
In May, the Commodity Futures Trading Commission’s general counsel and chief economist issued a memo spelling out guidelines for cost-benefit analyses. The memo and other efforts to slow down the Dodd-Frank rules later drew rare praise from the agency’s internal watchdog, which said the commission has taken proactive steps to address concerns.
Scott O’Malia, a Republican commissioner at the futures trading commission, also called for the agency to re-examine every cost-benefit analysis drawn up for Dodd-Frank. Mr. O’Malia warned this month that the commission does not have the final word, as the S.E.C. has recently learned.
Still, most regulators are hesitant to strike the panic button.
Mr. Chilton said that theyhear about potential lawsuits with some frequency, and there’s an old saying in Washington that, if you’re not part of the solution, there’s plenty of money to be made being part of the problem.
A new front has opened in the behind-the-scenes battle over financial regulation.
Industry groups have been examining legal challenges to the Securities and Exchange Commission’s new corporate whistle-blower program and a provision surrounding the extraction of oil and natural gas from foreign countries, people briefed on the talks said. The Commodity Futures Trading Commission’s plan to curb speculative trading is also under fire.
The catalyst has been a federal appeals court decision in July striking down an S.E.C. rule that would have made it easier for shareholders to nominate company directors. The so-called proxy access rule stemmed from the Dodd-Frank act, the sweeping regulatory overhaul enacted in the wake of the financial crisis.
In recent weeks, lawyers and Wall Street trade groups have gathered in Washington to ponder the next big case. Lawyers branded one meeting, held by the United States Chamber of Commerce, as “Dodd-Frank Excesses,” according to two people who were notified of the meeting.
Until now, Wall Street relied largely on an army of lobbyists to chisel away at 300 new rules flowing from the S.E.C. and the Commodity Futures Trading Commission, among other agencies. But while lobbying might yield the occasional loophole, judicial rulings can halt new rules altogether.
The lawyer who won the proxy case on behalf of the Chamber of Commerce said he would hope the agencies are taking to heart the potential consequences for Dodd-Frank rules.
Hal S. Scott, a professor at Harvard Law School and a director of the Committee on Capital Markets Regulation, a research group that has been a critic of Dodd-Frank, said he does see lots of challenges coming down the pike.
Regulators, reluctant to give in to industry pressure, are rushing to safeguard their rules from legal action. The commodity commission, having already delayed several Dodd-Frank rules for six months, is now studying the proxy case and considering adjustments to some proposed regulations, according to a person close to the agency. Earlier this month, the agency dispatched several staff members to meet with S.E.C. officials about the recent court decision.
For its part, the S.E.C. is weighing an appeal of the proxy ruling. The S.E.C. is also adding economists, planning to hire eight over the next two years, after the appeals court rebuked the agency for not fully evaluating the proxy rule’s economic effects.
The legal challenges are rooted in a 1996 law that requires the S.E.C. to promote efficiency, competition and capital formation. The law enabled the financial industry to build lawsuits around the economic costs of a rule, regardless of its merits.
In 2005, the Chamber of Commerce was the first business group to invoke the law, using it to successfully challenge certain S.E.C. rules for the mutual fund industry. The chamber later gained momentum with a string of similar victories in the United States Court of Appeals for the District of Columbia Circuit. Altogether, the appeals court has tossed out three financial regulations in the last six years, including the proxy rule.
Mr. Scalia, a partner at the law firm Gibson Dunn and the son of Supreme Court Justice Antonin Scalia, was on the winning end of each case.
Banks and corporations, rather than challenging the rules directly at the risk of alienating regulators, turn to seasoned litigators like Mr. Scalia and influential trade groups like the Chamber of Commerce to lead the fight. For more than 30 years, the chamber has had a separate litigation center, which operates as its own law firm in Washington.
The S.E.C.’s former general counsel who now works at the law firm Latham & Watkins sai it is usually not in the interest of a single business to mount a claim, and that you need some cut-out man or organization that speaks for broad groups.
The industry has shied from mounting a broader challenge to Dodd-Frank itself, finding it cheaper and easier to gradually chip away at the law’s fiercest provisions. Lawyers say a single lawsuit contesting the constitutionality of Dodd-Frank could take years — and millions of dollars — to wind through the courts, with little chance of succeeding.
By some measures, the proxy rule was an unlikely choice to challenge on economic grounds. The S.E.C. produced 60 pages on a cost-benefit analysis of the rule and spent 21,000 staff hours drafting it over two years, Mary L. Schapiro, the agency’s chairwoman, said in a recent letter to Congress.
That the proxy regulation still did not pass muster does not bode well for several other Dodd-Frank rules that received considerably less explication, sometimes only 25 pages, on their economic effects.
Financial trade groups, according to several lawyers, are now considering suits against the S.E.C.’s corporate whistle-blower office, which opened last week. The chamber, at least, argues that the whistle-blower program allows tipsters to undermine internal compliance departments.
Industry groups are also looking at claims against a few more obscure Dodd-Frank provisions. One S.E.C. regulation requires companies to disclose whether they manufacture goods using so-called conflict minerals like gold from Congo.
Tiffany & Company argued in a letter to the S.E.C. that the proposed rules “would violate the First Amendment,” laying the groundwork for business groups to mount a constitutional challenge.
Some letters are even blunter, as groups invoke the proxy case as a cautionary tale.
Royal Dutch Shell wrote the S.E.C. this month about our expected costs stemming from a proposal about oil extraction. Shell filed the letter, it said, in light of the recent decision by the U.S. Court of Appeals.
The commodity commission has received a barrage of hostile letters, too, some foreshadowing legal action. In March, the Futures Industry Association urged the commission to scrap its plan for reining in speculative commodities trading, saying it may be legally infirm.
Bart Chilton, a Democratic commissioner at the agency who has championed tough position limits on oil, corn and the like, sought feedback on the plan from the CME Group, the nation’s largest futures exchange. But at CME’s Chicago headquarters last fall, executives declined to discuss the proposal with Mr. Chilton, saying the Commodity Futures Trading Commission lacked the legal authority to impose trading limits.
With the industry firing such warning shots, regulators have spent months shielding their rules from litigation.
In May, the Commodity Futures Trading Commission’s general counsel and chief economist issued a memo spelling out guidelines for cost-benefit analyses. The memo and other efforts to slow down the Dodd-Frank rules later drew rare praise from the agency’s internal watchdog, which said the commission has taken proactive steps to address concerns.
Scott O’Malia, a Republican commissioner at the futures trading commission, also called for the agency to re-examine every cost-benefit analysis drawn up for Dodd-Frank. Mr. O’Malia warned this month that the commission does not have the final word, as the S.E.C. has recently learned.
Still, most regulators are hesitant to strike the panic button.
Mr. Chilton said that theyhear about potential lawsuits with some frequency, and there’s an old saying in Washington that, if you’re not part of the solution, there’s plenty of money to be made being part of the problem.
GOOGLE TO BUY MOTOROLA MOBILITY
Article First Appeared in New York Times:
In a bid to strengthen its mobile business, Google announced on Monday that it would acquire Motorola Mobility Holdings, the cellphone business that was split from Motorola, for $40 a share in cash, or $12.5 billion.
The offer — by far Google’s largest ever for an acquisition — is 63 percent above the closing price of Motorola Mobility shares on Friday. Motorola manufactures phones that run on Google’s Android software.
Android has become an increasingly important platform for Google, as global smartphone adoption accelerates. The platform, launched in 2007, is now used in more than 150 million devices, with 39 manufacturers.
The acquisition would turn Google, which makes the Android mobile operating system, into a full-fledged cellphone manufacturer, in direct competition with Apple.
“This is an emphatic exclamation point that Google is a mobile company,” said Ben Schachter, an analyst with Macquarie Capital. “This is clearly a defensive deal, they were backed in a corner and they had to protect the Android platform.”
Google, Motorola and Mobile
Both companies have met with both successes and struggles as they adapt to and influence a changing market for mobile phones.
The deal answers a big question about Google’s next strategic step in wireless. Google has been battling with Apple and Microsoft over patents.
Last month, Apple and Microsoft led a consortium of technology companies in a $4.5 billion purchase of roughly 6,000 patents from Nortel Networks, the Canadian telecommunications maker that filed for bankruptcy in 2009. Google, which lost out in the bidding, criticized the deal as an anticompetitive strategy. Several weeks later, Google acquired more than 1,000 patents from I.B.M.
Motorola holds more than 17,000 patents.
While the acquisition will move Google directly into the telecommunications hardware business, Larry Page, Google’s chief executive, said in a blog post that “this acquisition will not change our commitment to run Android as an open platform. Motorola will remain a licensee of Android and Android will remain open. We will run Motorola as a separate business.”
Still, the deal is certain to attract significant antitrust scrutiny. The Federal Trade Commission is already investigating Google’s dominance in several areas of its business. The company has agreed to pay a $2.5 billion reverse termination fee, if it walks away, and Motorola will pay a $375 million break-up fee if it takes another offer, according to a person close to the transaction, who was not authorized to speak.
In a conference call on Monday morning, Google said it was confident that it will be able to win regulatory approval, since the deal will ultimately improve competition in the smart phone market.
“We think this is a competitive transaction,” David Drummond, the company’s chief legal officer said. “This is not a horizontal transaction, Google has not materially been in the handset business.”
The acquisition of a major handset maker may still pose a significant challenge to the search giant, which has not specialized in manufacturing or marketing of smartphones. Last year, it closed down the online store for its first Google-branded phone, the Nexus One, citing the store’s underwhelming performance. A Motorola tie-up may also irk other phone manufacturers, like Samsung and HTC, which will now be competing directly with Google.
“Can they convince their competitors that Motorola will truly operate as a standalone business?” Mr. Schachter said.
And while Google has made dozens of acquisitions in recent years, most of them have been for less than $1 billion — despite a current war chest of some $40 billion in cash. On the company’s official blog, Mr. Page said Google was purchasing the handset maker to bolster its Android mobile operating system and increase the number of patents it owned.
Android accounted for 43.4 percent of smartphone sales in the second quarter, according to Gartner Research, a major increase from the year ago period, when it made up about 17 percent of sales.
“Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anticompetitive threats from Microsoft, Apple and other companies,” Mr. Page said.
Carl C. Icahn, Motorola Mobility’s second-largest shareholder, had urged the company last month to “explore alternatives regarding its patent portfolio to enhance shareholder value.” Mr. Icahn owns 9.03 percent of Motorola Mobility.
On Monday, he applauded the transaction, calling it “a great outcome for all shareholders of Motorola Mobility, especially in light of today’s markets.”
Lazard and the law firm of Cleary Gottlieb Steen & Hamilton advised Google. Frank Quattrone’s investment bank, Qatalyst Partners, Centerview Partners and the law firm Wachtell, Lipton, Rosen & Katz advised Motorola Mobility.
The acquisition has been approved by both boards.
In a bid to strengthen its mobile business, Google announced on Monday that it would acquire Motorola Mobility Holdings, the cellphone business that was split from Motorola, for $40 a share in cash, or $12.5 billion.
The offer — by far Google’s largest ever for an acquisition — is 63 percent above the closing price of Motorola Mobility shares on Friday. Motorola manufactures phones that run on Google’s Android software.
Android has become an increasingly important platform for Google, as global smartphone adoption accelerates. The platform, launched in 2007, is now used in more than 150 million devices, with 39 manufacturers.
The acquisition would turn Google, which makes the Android mobile operating system, into a full-fledged cellphone manufacturer, in direct competition with Apple.
“This is an emphatic exclamation point that Google is a mobile company,” said Ben Schachter, an analyst with Macquarie Capital. “This is clearly a defensive deal, they were backed in a corner and they had to protect the Android platform.”
Google, Motorola and Mobile
Both companies have met with both successes and struggles as they adapt to and influence a changing market for mobile phones.
The deal answers a big question about Google’s next strategic step in wireless. Google has been battling with Apple and Microsoft over patents.
Last month, Apple and Microsoft led a consortium of technology companies in a $4.5 billion purchase of roughly 6,000 patents from Nortel Networks, the Canadian telecommunications maker that filed for bankruptcy in 2009. Google, which lost out in the bidding, criticized the deal as an anticompetitive strategy. Several weeks later, Google acquired more than 1,000 patents from I.B.M.
Motorola holds more than 17,000 patents.
While the acquisition will move Google directly into the telecommunications hardware business, Larry Page, Google’s chief executive, said in a blog post that “this acquisition will not change our commitment to run Android as an open platform. Motorola will remain a licensee of Android and Android will remain open. We will run Motorola as a separate business.”
Still, the deal is certain to attract significant antitrust scrutiny. The Federal Trade Commission is already investigating Google’s dominance in several areas of its business. The company has agreed to pay a $2.5 billion reverse termination fee, if it walks away, and Motorola will pay a $375 million break-up fee if it takes another offer, according to a person close to the transaction, who was not authorized to speak.
In a conference call on Monday morning, Google said it was confident that it will be able to win regulatory approval, since the deal will ultimately improve competition in the smart phone market.
“We think this is a competitive transaction,” David Drummond, the company’s chief legal officer said. “This is not a horizontal transaction, Google has not materially been in the handset business.”
The acquisition of a major handset maker may still pose a significant challenge to the search giant, which has not specialized in manufacturing or marketing of smartphones. Last year, it closed down the online store for its first Google-branded phone, the Nexus One, citing the store’s underwhelming performance. A Motorola tie-up may also irk other phone manufacturers, like Samsung and HTC, which will now be competing directly with Google.
“Can they convince their competitors that Motorola will truly operate as a standalone business?” Mr. Schachter said.
And while Google has made dozens of acquisitions in recent years, most of them have been for less than $1 billion — despite a current war chest of some $40 billion in cash. On the company’s official blog, Mr. Page said Google was purchasing the handset maker to bolster its Android mobile operating system and increase the number of patents it owned.
Android accounted for 43.4 percent of smartphone sales in the second quarter, according to Gartner Research, a major increase from the year ago period, when it made up about 17 percent of sales.
“Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anticompetitive threats from Microsoft, Apple and other companies,” Mr. Page said.
Carl C. Icahn, Motorola Mobility’s second-largest shareholder, had urged the company last month to “explore alternatives regarding its patent portfolio to enhance shareholder value.” Mr. Icahn owns 9.03 percent of Motorola Mobility.
On Monday, he applauded the transaction, calling it “a great outcome for all shareholders of Motorola Mobility, especially in light of today’s markets.”
Lazard and the law firm of Cleary Gottlieb Steen & Hamilton advised Google. Frank Quattrone’s investment bank, Qatalyst Partners, Centerview Partners and the law firm Wachtell, Lipton, Rosen & Katz advised Motorola Mobility.
The acquisition has been approved by both boards.
Wednesday, August 17, 2011
DEFICIT AGREEMENT HAS MEDICARE CUTS
Story first appeared in Bloomberg News.
Pfizer Inc., the world’s biggest drugmaker, will fight attempts to cut Medicare payments for medicines after the industry helped underwrite the U.S. health-care overhaul.
Drug companies contributed $112 billion in discounts and refunds to last year’s health-care law, helping Democrats make up for new spending in the bill. U.S. drugmakers led by Pfizer and Merck & Co. are concerned they will be asked to give more in the debt-limit deal President Barack Obama signed on Aug. 2 that requires further negotiated cuts in government expenditures.
In interviews Pfizer executives expressed frustration that their contributions to the Affordable Care Act are substantial and fundamental.
Pharmaceutical companies are only 10 percent of the health-care spend in the United States, and feel they are the most efficient aspect of healthcare spending.
Squeezing drug savings from Medicare, the U.S. health program for the elderly and disabled, may cost drug makers $20 billion and eliminate 260,000 jobs, according to the Pharmaceutical Research and Manufacturers of America in Washington.
President Obama endorses a proposal to discount drugs for Medicare patients who also qualify for Medicaid, the federal- state health program for the poor.
Sixty-two percent of investors expect lawmakers to approve the policy this year, according to an Aug. 3 e-mail survey of 391 investors by ISI Group in New York.
12-Member Panel
Drugmakers are focusing their lobbying muscle on a yet-to- be-named panel of 12 members of Congress charged with carving savings from all parts of the government. In a July letter to House Speaker and Democratic House Minority Leader, 32 House members argued against further drug discounts for the poorest Medicare patients.
The drug companies and other health-care providers spend more on Washington lobbying than any other industry, topping $243 million last year, according to the Center for Responsive Politics, a Washington research group. Pfizer paid for 83 lobbyists and spent $13.38 million, more than any other drug company, while Merck devoted $7.61 million to lobbying.
A U.S. House and Senate rejection of the panel’s recommendations would trigger an automatic 2 percent, across- the-board reduction to Medicare under the accord reached this month, according to the Congressional Budget Office.
Pfizer stock price has been falling recently losing 3 percent in 2011
and Merck stock has also fallen 4 percent.
Medicare Cuts Loom
Medicare is projected to cost $566 billion in 2012, and $922 billion a year by 2020. The Medicare program spent about $62 billion for prescription drugs in 2010, according to the trustees of the Medicare trust funds.
Merck, the second-biggest U.S. drugmaker, is arguing that it be spared from Medicare cuts and “will vigorously oppose any targeted, pharmaceutical-industry specific approach to increasing federal revenues,” says a spokesman for the Whitehouse Station, New Jersey- based company.
Drug industry lobbying is centering on Medicare’s Part D drug benefit that the government funds and private insurers such as UnitedHealth Group Inc. run. Part D covers Medicare patients as well as so-called dual eligibles, or the almost 8.8 million people who qualify for both Medicare and Medicaid, according to the Kaiser Family Foundation in Menlo Park, California.
Medicare Price Controls
Medicare pays higher prices for drugs for this group than Medicaid would. Offering additional discounts to the government to cover the mostly low-income elderly and disabled patients amounts to price controls, industry executives have said.
Merck will continue to advocate in favor of the highly competitive and efficient Medicare Part D marketplace that exists today.
Pfizer will oppose any further changes to the Medicare program.
Eli Lilly & Co., based in Indianapolis, also may see lower revenue from changes to Part D. Its antipsychotic drug Zyprexa is among those responsible for the most spending among dual- eligible patients.
Monitoring Changes
A spokes man for Eli Lilly said that programs like Medicare Part D should be considered a model rather than as a potential cut, and that Lilly is monitoring potential changes to ensure that innovation is protected.
Bristol-Myers Squibb Co. of New York also supports preserving the Medicare Part D program.
It is doubtful Republican members of the 12-member panel would back new cost controls on the program according to a New York-based analyst from Informa Plc of London.
One analyst stated that while cuts to Medicare drug prices might find favor with the Democrats, they are anathema to many Republicans who want less, not more, government involvement. He added that unfortunately for investors and students possibly looking to get a pharmacy degree, there is no useful detail yet on what will actually happen to drug spending.
Pfizer Inc., the world’s biggest drugmaker, will fight attempts to cut Medicare payments for medicines after the industry helped underwrite the U.S. health-care overhaul.
Drug companies contributed $112 billion in discounts and refunds to last year’s health-care law, helping Democrats make up for new spending in the bill. U.S. drugmakers led by Pfizer and Merck & Co. are concerned they will be asked to give more in the debt-limit deal President Barack Obama signed on Aug. 2 that requires further negotiated cuts in government expenditures.
In interviews Pfizer executives expressed frustration that their contributions to the Affordable Care Act are substantial and fundamental.
Pharmaceutical companies are only 10 percent of the health-care spend in the United States, and feel they are the most efficient aspect of healthcare spending.
Squeezing drug savings from Medicare, the U.S. health program for the elderly and disabled, may cost drug makers $20 billion and eliminate 260,000 jobs, according to the Pharmaceutical Research and Manufacturers of America in Washington.
President Obama endorses a proposal to discount drugs for Medicare patients who also qualify for Medicaid, the federal- state health program for the poor.
Sixty-two percent of investors expect lawmakers to approve the policy this year, according to an Aug. 3 e-mail survey of 391 investors by ISI Group in New York.
12-Member Panel
Drugmakers are focusing their lobbying muscle on a yet-to- be-named panel of 12 members of Congress charged with carving savings from all parts of the government. In a July letter to House Speaker and Democratic House Minority Leader, 32 House members argued against further drug discounts for the poorest Medicare patients.
The drug companies and other health-care providers spend more on Washington lobbying than any other industry, topping $243 million last year, according to the Center for Responsive Politics, a Washington research group. Pfizer paid for 83 lobbyists and spent $13.38 million, more than any other drug company, while Merck devoted $7.61 million to lobbying.
A U.S. House and Senate rejection of the panel’s recommendations would trigger an automatic 2 percent, across- the-board reduction to Medicare under the accord reached this month, according to the Congressional Budget Office.
Pfizer stock price has been falling recently losing 3 percent in 2011
and Merck stock has also fallen 4 percent.
Medicare Cuts Loom
Medicare is projected to cost $566 billion in 2012, and $922 billion a year by 2020. The Medicare program spent about $62 billion for prescription drugs in 2010, according to the trustees of the Medicare trust funds.
Merck, the second-biggest U.S. drugmaker, is arguing that it be spared from Medicare cuts and “will vigorously oppose any targeted, pharmaceutical-industry specific approach to increasing federal revenues,” says a spokesman for the Whitehouse Station, New Jersey- based company.
Drug industry lobbying is centering on Medicare’s Part D drug benefit that the government funds and private insurers such as UnitedHealth Group Inc. run. Part D covers Medicare patients as well as so-called dual eligibles, or the almost 8.8 million people who qualify for both Medicare and Medicaid, according to the Kaiser Family Foundation in Menlo Park, California.
Medicare Price Controls
Medicare pays higher prices for drugs for this group than Medicaid would. Offering additional discounts to the government to cover the mostly low-income elderly and disabled patients amounts to price controls, industry executives have said.
Merck will continue to advocate in favor of the highly competitive and efficient Medicare Part D marketplace that exists today.
Pfizer will oppose any further changes to the Medicare program.
Eli Lilly & Co., based in Indianapolis, also may see lower revenue from changes to Part D. Its antipsychotic drug Zyprexa is among those responsible for the most spending among dual- eligible patients.
Monitoring Changes
A spokes man for Eli Lilly said that programs like Medicare Part D should be considered a model rather than as a potential cut, and that Lilly is monitoring potential changes to ensure that innovation is protected.
Bristol-Myers Squibb Co. of New York also supports preserving the Medicare Part D program.
It is doubtful Republican members of the 12-member panel would back new cost controls on the program according to a New York-based analyst from Informa Plc of London.
One analyst stated that while cuts to Medicare drug prices might find favor with the Democrats, they are anathema to many Republicans who want less, not more, government involvement. He added that unfortunately for investors and students possibly looking to get a pharmacy degree, there is no useful detail yet on what will actually happen to drug spending.
Tuesday, August 16, 2011
Obama Care Takes A Blow
Story first appeared in the Associated Press.
A federal appeals panel's ruling striking down the centerpiece of President Barack Obama's health care overhaul moves the question of whether Americans can be required to buy health insurance a step closer to the U.S. Supreme Court.
A divided three-judge panel of the 11th Circuit Court of Appeals ruled Friday that Congress overstepped its authority when lawmakers passed the so-called individual mandate, the first such decision by a federal appeals court. It's a stinging blow to Obama's signature legislative achievement, as many experts agree the requirement that Americans carry health insurance - or face tax penalties - is the foundation for other parts of the law and key to paying for it.
Administration officials said they are confident the ruling will not stand. The Justice Department can ask the full 11th Circuit to review the panel's ruling and will also likely appeal to the Supreme Court.
Legal observers long expected the case would ultimately land in the high court, but experts said Friday's ruling could finally force the justices to take the case.
J. Peter Rich, a Los Angeles-based health care attorney, said the Supreme Court had never weighed in on an issue such as the provision requiring individuals to buy health insurance.
He said they have never ruled on this specific issue, and this really is a case of first impression, although the Obama administration may try to argue otherwise.
Rich said it's not unconstitutional for individual states to have such requirements, noting that Massachusetts has a similar law in place. However, the high court has yet to weigh in on whether a federal requirement passes muster.
In the Atlanta ruling, Chief Judge Joel Dubina and Circuit Judge Frank Hull found in a 207-page opinion that lawmakers cannot require people to enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die.
In a lengthy dissent, Circuit Judge Stanley Marcus accused the majority of ignoring the undeniable fact that Congress' commerce power has grown exponentially over the past two centuries. He wrote that Congress generally has the constitutional authority to create rules regulating large areas of the national economy.
Dubina was tapped by former President George H.W. Bush, a Republican, while Hull and Marcus were picks of former Democratic President Bill Clinton.
The White House argued the legislative branch was using a quintessential power - its constitutional ability to regulate interstate commerce, including the health care industry - when it passed the overhaul law.
A White House adviser said individuals who choose to go without health insurance are making an economic decision that affects all of us - when people without insurance obtain health care they cannot pay for, those with insurance and taxpayers are often left to pick up the tab.
The 11th Circuit's ruling, which sided with 26 states that had sued to stop the law from taking effect, is the latest contradictory judicial opinion on the health care debate. The federal appeals court in Cincinnati upheld the individual mandate in June, and an appeals court in Richmond has heard similar challenges to the law. Several lower court judges have also issued differing opinions on the debate.
It's the latest hit the president's taken in what's been a rough month that's included humiliating blows on both the economy and in Afghanistan, while polls show deteriorating public support for both him and Congress.
Obama has been criticized by his Democratic base for his failures, which include dropping his push for tax increases as part of last week's compromise to raise the government's debt ceiling and his inability to let the Bush tax cuts for the wealthy to expire at the end of last year.
The Atlanta-based court is considered by many observers to be the most pivotal legal battleground yet because it reviewed a sweeping ruling by U.S. District Judge Roger Vinson, a Republican appointee from Florida who not only struck down the individual mandate but threw out other provisions ranging from Medicare discounts for some seniors to a change that allows adult children up to age 26 to remain on their parents' coverage.
His reasoning was that the insurance requirement was inextricably bound together with the rest of the law, but the 11th Circuit concluded Vinson went too far. The panel's ruling noted that the lion's share of the act has nothing to do with private insurance, much less the mandate that individuals buy insurance.
The provision requiring all Americans to carry health insurance or face a tax penalty has been at the center of the legal debate. The law does not allow insurers to turn away the sick or charge them outrageous premiums. To cover their health care costs, others - particularly the young and healthy - will need to pay premiums to keep costs from skyrocketing. The potential tax penalties are meant to ensure they will do so.
The Obama Administration also has a little-known fallback if it loses the court battle. The government can borrow a strategy that Medicare uses to compel consumers to sign up for insurance.
Medicare's "Part B" coverage for doctor visits carries its own monthly premium. Yet more than nine in 10 seniors sign up. The reason: Those who opt out when they first become eligible face a lifelong tax penalty that escalates the longer they wait.
The key difference is that the Medicare law doesn't require that seniors buy the Part B coverage. Experts say Obama's overhaul could also be changed in a similar fashion.
The challenging states had urged the 11th Circuit to uphold Vinson's ruling, saying in a court filing that letting the law stand would set a troubling precedent that "would imperil individual liberty, render Congress's other enumerated powers superfluous, and allow Congress to usurp the general police power reserved to the states."
The Justice Department countered that Congress had the power to require most people to buy health insurance or face tax penalties because Congress can regulate businesses that operate across state lines, including health care providers.
The reaction was swift and celebratory from the states that filed the lawsuit.
Michigan Attorney General Bill Schuette called the decision a huge victory in the fight to protect the freedom of American citizens from the long arm of the federal government" Alabama Attorney General Luther Strange called it a monumental case for individual liberty. And Texas Attorney General Greg Abbott declared: "Obamacare' is closer to an end.
Florida Attorney General Pam Bondi issued a statement late Friday declaring that states had prevailed in preventing Congress from infringing on the individual liberty protected by the U.S. Constitution.
A separate legal ruling Friday also buoyed critics of the law. The Ohio Supreme Court appeared to clear the way for voters there to decide whether to reject parts of the health care law in November with a unanimous ruling that rejected a liberal policy group's challenge of the so-called Health Care Freedom Amendment.
But the administration did get a small dose of good news Friday. The federal appeals court in San Francisco found that a former California lawmaker and a legal foundation could not file another challenge on the overhaul.
The 11th Circuit's ruling didn't come as a complete surprise. During oral arguments in June, each of the three judges repeatedly raised questions about the overhaul and expressed unease with the insurance requirement. And each judge worried aloud if upholding the landmark law could open the door to Congress adopting other sweeping economic mandates.
The arguments took place in what's considered one of the nation's most conservative appeals courts, but the randomly selected panel represents different judicial perspectives.
None of the three is considered either a stalwart conservative or an unfaltering liberal, but observers were quick to point out that the decisive vote came from a Democrat appointee: Hull, a former federal judge in Atlanta.
A federal appeals panel's ruling striking down the centerpiece of President Barack Obama's health care overhaul moves the question of whether Americans can be required to buy health insurance a step closer to the U.S. Supreme Court.
A divided three-judge panel of the 11th Circuit Court of Appeals ruled Friday that Congress overstepped its authority when lawmakers passed the so-called individual mandate, the first such decision by a federal appeals court. It's a stinging blow to Obama's signature legislative achievement, as many experts agree the requirement that Americans carry health insurance - or face tax penalties - is the foundation for other parts of the law and key to paying for it.
Administration officials said they are confident the ruling will not stand. The Justice Department can ask the full 11th Circuit to review the panel's ruling and will also likely appeal to the Supreme Court.
Legal observers long expected the case would ultimately land in the high court, but experts said Friday's ruling could finally force the justices to take the case.
J. Peter Rich, a Los Angeles-based health care attorney, said the Supreme Court had never weighed in on an issue such as the provision requiring individuals to buy health insurance.
He said they have never ruled on this specific issue, and this really is a case of first impression, although the Obama administration may try to argue otherwise.
Rich said it's not unconstitutional for individual states to have such requirements, noting that Massachusetts has a similar law in place. However, the high court has yet to weigh in on whether a federal requirement passes muster.
In the Atlanta ruling, Chief Judge Joel Dubina and Circuit Judge Frank Hull found in a 207-page opinion that lawmakers cannot require people to enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die.
In a lengthy dissent, Circuit Judge Stanley Marcus accused the majority of ignoring the undeniable fact that Congress' commerce power has grown exponentially over the past two centuries. He wrote that Congress generally has the constitutional authority to create rules regulating large areas of the national economy.
Dubina was tapped by former President George H.W. Bush, a Republican, while Hull and Marcus were picks of former Democratic President Bill Clinton.
The White House argued the legislative branch was using a quintessential power - its constitutional ability to regulate interstate commerce, including the health care industry - when it passed the overhaul law.
A White House adviser said individuals who choose to go without health insurance are making an economic decision that affects all of us - when people without insurance obtain health care they cannot pay for, those with insurance and taxpayers are often left to pick up the tab.
The 11th Circuit's ruling, which sided with 26 states that had sued to stop the law from taking effect, is the latest contradictory judicial opinion on the health care debate. The federal appeals court in Cincinnati upheld the individual mandate in June, and an appeals court in Richmond has heard similar challenges to the law. Several lower court judges have also issued differing opinions on the debate.
It's the latest hit the president's taken in what's been a rough month that's included humiliating blows on both the economy and in Afghanistan, while polls show deteriorating public support for both him and Congress.
Obama has been criticized by his Democratic base for his failures, which include dropping his push for tax increases as part of last week's compromise to raise the government's debt ceiling and his inability to let the Bush tax cuts for the wealthy to expire at the end of last year.
The Atlanta-based court is considered by many observers to be the most pivotal legal battleground yet because it reviewed a sweeping ruling by U.S. District Judge Roger Vinson, a Republican appointee from Florida who not only struck down the individual mandate but threw out other provisions ranging from Medicare discounts for some seniors to a change that allows adult children up to age 26 to remain on their parents' coverage.
His reasoning was that the insurance requirement was inextricably bound together with the rest of the law, but the 11th Circuit concluded Vinson went too far. The panel's ruling noted that the lion's share of the act has nothing to do with private insurance, much less the mandate that individuals buy insurance.
The provision requiring all Americans to carry health insurance or face a tax penalty has been at the center of the legal debate. The law does not allow insurers to turn away the sick or charge them outrageous premiums. To cover their health care costs, others - particularly the young and healthy - will need to pay premiums to keep costs from skyrocketing. The potential tax penalties are meant to ensure they will do so.
The Obama Administration also has a little-known fallback if it loses the court battle. The government can borrow a strategy that Medicare uses to compel consumers to sign up for insurance.
Medicare's "Part B" coverage for doctor visits carries its own monthly premium. Yet more than nine in 10 seniors sign up. The reason: Those who opt out when they first become eligible face a lifelong tax penalty that escalates the longer they wait.
The key difference is that the Medicare law doesn't require that seniors buy the Part B coverage. Experts say Obama's overhaul could also be changed in a similar fashion.
The challenging states had urged the 11th Circuit to uphold Vinson's ruling, saying in a court filing that letting the law stand would set a troubling precedent that "would imperil individual liberty, render Congress's other enumerated powers superfluous, and allow Congress to usurp the general police power reserved to the states."
The Justice Department countered that Congress had the power to require most people to buy health insurance or face tax penalties because Congress can regulate businesses that operate across state lines, including health care providers.
The reaction was swift and celebratory from the states that filed the lawsuit.
Michigan Attorney General Bill Schuette called the decision a huge victory in the fight to protect the freedom of American citizens from the long arm of the federal government" Alabama Attorney General Luther Strange called it a monumental case for individual liberty. And Texas Attorney General Greg Abbott declared: "Obamacare' is closer to an end.
Florida Attorney General Pam Bondi issued a statement late Friday declaring that states had prevailed in preventing Congress from infringing on the individual liberty protected by the U.S. Constitution.
A separate legal ruling Friday also buoyed critics of the law. The Ohio Supreme Court appeared to clear the way for voters there to decide whether to reject parts of the health care law in November with a unanimous ruling that rejected a liberal policy group's challenge of the so-called Health Care Freedom Amendment.
But the administration did get a small dose of good news Friday. The federal appeals court in San Francisco found that a former California lawmaker and a legal foundation could not file another challenge on the overhaul.
The 11th Circuit's ruling didn't come as a complete surprise. During oral arguments in June, each of the three judges repeatedly raised questions about the overhaul and expressed unease with the insurance requirement. And each judge worried aloud if upholding the landmark law could open the door to Congress adopting other sweeping economic mandates.
The arguments took place in what's considered one of the nation's most conservative appeals courts, but the randomly selected panel represents different judicial perspectives.
None of the three is considered either a stalwart conservative or an unfaltering liberal, but observers were quick to point out that the decisive vote came from a Democrat appointee: Hull, a former federal judge in Atlanta.
Thursday, August 11, 2011
FEDERAL TRADE COMMISSION LAWYERS QUESTION GOOGLE’S COMPETITION PRACTICES
Story first appeared on WSJ.com
U.S. antitrust regulators are focusing their investigation of Google Inc. on key areas of its business, including its Android mobile-phone software and Web-search related services, people familiar with the probe say.
Six weeks after serving Google with broad subpoenas, Federal Trade Commission lawyers, in conjunction with several state attorneys general, have been asking whether Google prevents smartphone manufacturers that use its Android operating system from using competitors' services, these people said.
Federal Trade Commission officials are focusing their antitrust investigation on several key areas of Google's business, including its Android mobile phone software and Web search related services. Joe White has details from Washington.
They also have inquired whether Google grants preferential placement on its website to its own products, such as Google's "Places" business listings, its "Shopping results" and Google Finance services above most other results.
And they're looking into allegations that Google unfairly takes information collected by rivals, such as reviews of local businesses, to use on its own specialized site and then demotes the rivals' services in its search results, the people said.
When the FTC probe first became official in June, Google said it wasn't clear what the agency was concerned about. But the early focus of the investigation suggests a potential threat to Google's plans to expand its commercial success beyond its current cash cow: the Web-search engine.
The European Commission, which has imposed restrictions on Microsoft Corp.'s ability to leverage its dominant computer-operating system to promote other services, has been carrying out its own broad antitrust probe of Google since last year.
Google denies that it engages in unfair or illegal competitive practices. The company has suggested the growing number of antitrust investigations have been spurred by rivals unsettled by its aggressive push into new business sectors.
The FTC's probe is still at an early stage, with investigators seeking to learn the inner workings of a complex business. An investigation of this kind can last a year or longer and won't necessarily result in the FTC's filing a lawsuit.
Even so, the existence of the probe already appears to be affecting the Web giant's behavior. The company has made tweaks to its search engine to mollify rivals and head off a possible legal clash with antitrust authorities.
For example, FTC lawyers have asked several Web companies about Google's practice of including customer reviews from websites such as Yelp and TripAdvisor on Google's own "Places" service, which has millions of pages for individual local businesses, these people said. Google Places competes with Yelp and other business-review sites, which have alleged Google stole their content.
In meetings with some complaining websites, Google executives have held firm that the practice wasn't anticompetitive, according to representatives of those sites.
Late last month, Google said it had removed snippets of reviews that originated on other sites from Google Places.
As part of its probe, the FTC is preparing to send out civil subpoenas to third parties to provide documents and evidence in its investigation, said people familiar with the matter. Investigators have already held a series of exploratory meetings and interviews with Google, its competitors and other third parties, giving a flavor of the kinds of areas they're concerned about.
Investigators have been asking technology companies whether Google is restricting the use of rivals' services on mobile devices using its widely used operating system, Android, the people said.
One alleged example has come to light in a private lawsuit, filed against Google by Skyhook Wireless Inc. The Boston-based company accused Google of using its market power to pressure smartphone makers into dropping Skyhook's location-sensing technology in favor of Google's own, competing service. Google has called it a baseless complaint.
FTC lawyers have also asked about the growing influence of Android and how it may be helping Google maintain its lead in Web search. Google's search engine is the default for many phones built using Android.
Research firm Canalys said this month that Android powered nearly half of new smartphones shipped worldwide in the second quarter of this year— ahead of both Apple Inc. and Nokia Corp.
Monday, August 8, 2011
FACEBOOK SPAMMER COULD SPEND 40 YEARS IN PRISON
Story first appeared in the Associated Press.
A Las Vegas man accused of sending more than 27 million spam messages to Facebook users faces federal fraud and computer tampering charges that could send him to prison for more than 40 years, according to a grand jury indictment.
Sanford Wallace, the self-proclaimed "Spam King," pleaded not guilty during an initial court appearance Thursday after being indicted July 6 on six counts of electronic mail fraud, three counts of intentional damage to a protected computer and two counts of criminal contempt.
The indictment filed in San Jose federal court said Wallace compromised about 500,000 Facebook accounts between November 2008 and March 2009 by sending massive amounts of spam through the company's servers on three separate occasions.
Wallace would collect Facebook user account information by sending "phishing" messages that tricked users of the social networking site into providing their passwords, the indictment said.
He would then use that information to log into their accounts and post spam messages on their friends' Facebook walls, the indictment said. Those who clicked on the link, thinking it came from their friend, were redirected to websites that paid Wallace for the Internet traffic.
In 2009, Palo Alto-based Facebook sued Wallace under federal anti-spam laws known as CAN-SPAM, prompting a judge to issue a temporary restraining order banning him from using the website. The indictment alleges he violated that order within a month, prompting the criminal contempt charges.
The judge in the lawsuit ultimately issued a default judgment against Wallace for $711 million, one of the largest-ever anti-spam awards, and referred him for possible criminal prosecution.
The indictment came after a two-year investigation of Wallace by the FBI, prosecutors said.
Facebook said they will continue to pursue and support both civil and criminal consequences for spammers or others who attempt to harm Facebook or the people who use their service.
Wallace was released after posting $100,000 bond Thursday, and he's due back in court on Aug. 22.
Wallace, 43, earned the monikers "Spam King" and "Spamford" as head of a company named Cyber Promotions that sent as many as 30 million junk e-mails per day in the 1990s.
In May 2008, social networking site MySpace won a $230 million judgment over junk messages sent to its members when a Los Angeles federal judge ruled against Wallace and his partner, Walter Rines, in another case brought under the same anti-spam laws cited in the Facebook lawsuit.
In 2006, Wallace was fined $4 million after the Federal Trade Commission accused him of running an operation that infected computers with software that caused flurries of pop-up ads, known as spyware.
If convicted on all counts in the latest criminal case, Wallace could faces more than 40 years in prison and a $2 million fine.
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