New York: Credit-Default Swaps=Insurance

Beginning in January, New York will regulate part of the previously unregulated credit-default-swap market, the state’s governor, David Paterson, announced today. The faulty use of the swaps has been heavily blamed for the current Wall Street credit crisis.Gov. Paterson also called on the federal...

By Stephen Taub • Sept. 22, 2008

Systemic Risk Haunts Credit-Default Swaps

The credit-default swap has been called both “the most important instrument in finance” by former Federal Reserve Chairman Alan Greenspan and a financial “weapon of mass destruction” by Warren Buffett. This week’s bankruptcy of Lehman Brothers and bailout of the insurer AIG may have proved both m...

By Alan Rappeport • Sept. 18, 2008

If McCain Were President He’d Fire Cox

Senator John McCain said that if he were president he would immediately fire Securities and Exchange Commission Chairman Christopher Cox because “in my view he has betrayed the public’s trust.”The Republican nominee for president made the statement while campaigning in Cedar Rapids, Iowa. “If I w...

By Roy Harris • Sept. 18, 2008

Insure This: Retiree Group Sues AIG Execs

The CEO and directors of American International Group Inc. were sued in Delaware Chancery Court by the City of New Orleans Employees’ Retirement System, which blamed mismanagement and risk-taking for the shareholder losses. The lawsuit, believed to be one of the first filed against the insurance ...

By Stephen Taub • Sept. 18, 2008

Fed Rescues AIG in $85 Billion Takeover

In a stunning move, the Federal Reserve announced at 9 p.m. Tuesday that it would take over failing insurance giant AIG and lend it $85 billion.“The [Federal Reserve Board of Governors] determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels ...

By Tim Reason • Sept. 16, 2008

Credit Suisse Joins Those Buying Back ARS

Credit Suisse Securities (USA) LLC agreed to pay civil penalties of $15 million, and to buy auction rate securities from individual investors, as part of a settlement announced by the North American Securities Administrators Association (NASAA). Under the settlement with North Carolina state secu...

By Stephen Taub • Sept. 16, 2008

AIG’s Fate Hanging in the Balance

Fueling more speculation about a cruel fate for embattled American International Group, Credit Suisse securities analyst Thomas Gallagher warned in a note to clients that there is a “heightened probability of a potential bankruptcy filing” by the giant holding company for insurance and other busi...

By Stephen Taub • Sept. 16, 2008

KB Ex-CEO Settles SEC Backdating Claim

The former chairman and CEO of homebuilder KB Home Inc., Bruce E. Karatz, agreed to pay $7.2 million to settle civil charges for his role in a stock-option backdating scheme that benefitted himself and other KB Home officers and employees.According to the regulator, from at least 1999 through 200...

By Stephen Taub • Sept. 15, 2008

Meltdown Means Opportunity for Risk Managers

The downward slide of Lehman Brothers and Merrill Lynch, culminating in this weekend’s stunning announcements, seems like more evidence of the poor quality of risk management on Wall Street — alongside Bear Stearns’ failure, the $7 billion loss caused by a rogue trader at Société Générale, and th...

By Robert Hertzberg • Sept. 15, 2008

Bankrupt Sponsor Leaves Pro Team in the Lurch

Michael Phelps may be a hot sponsorship commodity after collecting his record-breaking haul of eight gold medals at the Beijing Olympics. But companies still face risk when sponsorships go sour — an occurrence that likely will increase as the economy slows.The latest company to feel the sting of ...

By Marie Leone • Sept. 12, 2008

Whopping Backdating Settlement Reached

Former UnitedHealth Group CEO and chairman William McGuire has agreed to pay $30 million to settle a class-action lawsuit over options-dating issues. McGuire also agreed to cancel options to purchase 3.675 million shares of stock, according to The California Public Employees’ Retirement System (C...

By Stephen Taub • Sept. 10, 2008

Apple Settles Backdating Case

Apple Inc. and several of its officers and directors, including two CFOs, agreed to settle their stock-options backdating case for $14 million, The National Law Journal reported.In a deal that won a federal judge’s preliminary approval on Monday, Apple also agreed to pay $7.3 million in attorney ...

By Stephen Taub • Sept. 10, 2008

$7.2 Billion Approved for Enron Shareholders

A Federal judge has approved the distribution of $7.2 billion in settlements to former Enron shareholders who lost money when the one-time energy giant went bankrupt almost seven years ago, the Houston Chronicle reported. U.S. District Judge Melinda Harmon also approved the payment of $688 milli...

By Stephen Taub • Sept. 9, 2008

Norwegians Added Rio Tinto to Blacklist

A Norwegian sovereign wealth fund has banned Rio Tinto from its portfolio because the mining company reportedly is not environmentally responsible.Norway’s Ministry of Finance said its government pension fund cannot invest in the international mining group because its Grasberg mine in Indonesia —...

By Stephen Taub • Sept. 9, 2008

A Leaky Pool

IT IS a simple but brilliant idea. Pooling risks—the essence of insurance—allows people and businesses to protect themselves from disaster. The insured have the incentive to buy homes or build business, knowing that they will be saved from the worst outcome. That enables the economy to grow faste...

By Economist Staff • Sept. 8, 2008

Ex-CFO Settles Self-Dealing Fraud Charges

The former president and CFO of a Dallas health-product marketing company, along with another one-time executive, settled Securities and Exchange Commission civil charges that they engaged in a fraud arising from undisclosed related-party transactions.Mark D. Woodburn, former president, director ...

By Stephen Taub • Sept. 4, 2008

Accountant’s Theft Excuse? “Deep Middle Age” Depression

A Melbourne, Australia, accountant, guilty of stealing nearly $810,000 from a client of 10 years, told the judge through his lawyer that the thefts were the actions of a man in “deep middle age” and suffering from depression.Lance Robert Scholes, chairman and managing partner of accounting firm H...

By Stephen Taub • Sept. 4, 2008

Green Buildings: A Slow, Steady Blip

The greening of commercial real estate is no longer an arcane issue. Witness the practical evidence: Green building construction is predicted to increase to $60 billion by 2010, at which time 10 percent of new commercial construction is expected to be green, according to the McGraw-Hill Construct...

By Marie Leone • Sept. 4, 2008

The Counterintuitive Commercial Real Estate Market

Unexpectedly, the current downward drift in commercial real estate prices isn’t translating directly into cheaper rents for corporations. Faced with the sudden uptick in inflation, landlords are finding ways to collect more money from lessees.To be sure, the Moody’s/REAL Commercial Property Index...

By Marie Leone • Sept. 4, 2008

Jailed CA Ex-Chief Kumar Points at Others

Former CA chairman Sanjay Kumar, from the prison cell where he is serving a 12-year term for his role in a massive accounting fraud scandal, pointed the finger at one-time boss and friend Charles Wang. Kumar alleged that Wang, cofounder of the company previously known as Computer Associates “pers...

By Stephen Taub • Sept. 3, 2008

Gulf in Opinion

As they shopped an impending IPO to investors this summer, Hartmut Mehdorn and Diethelm Sack, CEO and CFO of state-owned German railway group Deutsche Bahn, made headlines by visiting the offices of sovereign wealth funds in Dubai and Abu Dhabi. They’re not the only executives adding the Gulf to ...

By Jason Karaian • Sept. 3, 2008

Belgian Waffle

What a difference a couple of weeks make. When Gilbert Mittler, then finance chief of Fortis, spoke with CFO Europe in June, his views on the Dutch-Belgian bank’s strategy were clear and confident. It would be “substantially less exciting,” he said, if he had to manage only the subprime crisis or...

By Tim Burke • Sept. 3, 2008

Kozlowski, Swartz Seek End to Jail Terms

Dennis Kozlowski and Mark Swartz, the erstwhile chief executive officer and CFO, respectively, of Tyco International, are still trying to end their prison terms.Arguing that they were wrongly convicted at a flawed trial, the imprisoned former executives of the conglomerate went before New York’s ...

By Stephen Taub • Sept. 2, 2008

Alpharma Reaches for a Pill

Specialty drug-maker Alpharma Inc. — faced with an unsolicited $1.4 billion takeover bid from King Pharmaceuticals Inc. — adopted a shareholder rights plan designed to thwart the offer that the target called “inadequate and not in the best interests of Alpharma shareholders.”The decision to imple...

By Stephen Taub • Sept. 2, 2008

Death by Committee?

Sir Barnett Cocks, a clerk in the UK’s House of Commons, once provided this cynical definition of a committee: “a cul-de-sac down which ideas are lured and then quietly strangled.”As two high-profile advisory groups — the Securities and Exchange Commission’s Advisory Committee on Improvements to ...

By Vincent Ryan • Sept. 1, 2008