Thursday PM June 24th, 2010
by: Ed Mayberry, June 24, 2010 9:06:00 pm
The Supreme Court has sided with former Enron CEO Jeffrey Skilling in limiting the use of a federal fraud law that has been a favorite of white-collar crime prosecutors. The court says that the "honest services" law could not be used in convicting Skilling for his role in the collapse of Enron. That's an anti-fraud law that makes it a crime to "deprive someone of the intangible right of honest service." The opinion finds the honest services law only covers bribery and kickback schemes. Skilling was not accused of either, but of deceiving accountants. Nancy Rappaport is the former dean of the University of Houston Law School. “Congress was trying to prevent people from being bribed to do things that were not in their organization’s best interests. What they’re trying to say in ‘honest services’ is that if you were working on your own behalf and you don’t have the organization’s best interests at heart, you could be subject to this criminal sanction. But if you’re doing something that ends up being phenomenally stupid, but you did it with every intention to do it with the best interests of the organization, that’s not a reason to be prosecuted for ‘honest services’.”
But Justice Ruth Bader Ginsburg said in her majority opinion that the ruling does not necessarily require Skilling's conviction to be overturned. The court says Skilling was able to get a fair jury in Houston, although some of the charges may not have been covered by the law. Skilling is in a suburban Denver prison after being found guilty of 19 counts of conspiracy, securities fraud, insider trading and lying to auditors in connection with the 2001 fall of Enron.
A judge has granted a request to have jailed Texas financier R. Allen Stanford tried separately from his three co-defendants on charges that they bilked investors out of $7 billion in a massive ponzi scheme. U.S. District Judge David Hittner of Houston signed an order granting the request by attorneys for Laura Pendergest-Holt, Gilbert Lopez and Mark Kuhrt. The three former executives at Stanford International Bank had asked to be tried separately, saying that Stanford's “circus-like” conduct in the case, including continuously changing attorneys, would affect their right to a fair trial. Prosecutors had objected to the request. Bob Bennett, Stanford's criminal attorney, said he welcomes the trial. Stanford's trial will begin on January 24th. The other three defendants will be tried jointly sometime after that.
The logistics coordinator onboard the ship that's been siphoning oil from a gushing well in the Gulf of Mexico tells the Associated Press that a cap on top has been reattached and is again capturing some of the crude. The crew member on the bridge of the Discoverer Enterpriser says the cap was placed back on the gusher early last evening. It had been off for more than 11 hours. The man, who asked not to be identified by name because he was not authorized to provide the information, says it will take awhile for the system to “get ramped back up.” Most recently, it was sucking up about 29,000 gallons an hour and directing it to the ship. An undersea robot bumped the cap and BP engineers removed because fluid seemed to be leaking, creating a possible safety hazard.
The Obama administration says it is complying with a judge's ruling overturning a moratorium on new drilling in the Gulf--so a motion to enforce the order by opponents of the moratorium should be denied. The Justice Department says in court papers that Interior Secretary Ken Salazar has instructed all employees to not take any action to enforce the moratorium. It also says the department is sending letters to operators who received notices of suspension that those notices have no legal effect at this time. The government is seeking a delay in the ruling overturning the moratorium while it appeals the decision. The moratorium had halted approval of any new permits for deep water projects and suspended drilling on 33 exploratory wells.
Meanwhile, Interior Secretary Salazar says he supports a two-year ban on government regulators going to work for the oil and gas industry. Salazar told the Senate Energy and Natural Resources Committee that a lifetime ban might be appropriate for some employees, depending on how high they are in the agency that regulates the industry. He made the comments under pointed questioning from Senator Ron Wyden, an Oregon Democrat who has criticized the practice of senior Interior employees going to work for the oil and gas industries. The revolving door problem has gotten the attention of Congress, President Obama and watchdog groups in the wake of the BP oil spill. Obama has promised to end the “cozy relationship” between the oil industry and federal regulators.
Governor Rick Perry has declared Sunday a day of prayer in Texas over lives lost and the environmental disaster of the Gulf of Mexico oil spill. Perry is urging Texans to pray Sunday “for the healing of individuals, the rebuilding of communities and the restoration of entire Gulf Coast environment.” Louisiana Governor Bobby Jindal has also declared Sunday a day of prayer in his state for perseverance in coping with the environmental crisis. Perry, who has returned to Austin after more than a week in China and other countries in Southeast Asia on an economic development trip, issued a proclamation related to the sinking of the Deepwater Horizon. The April 20th rig explosion killed 11 workers.
Initial claims for jobless benefits fell by the most in two months last week, but remain above levels consistent with healthy job growth. The Labor Department says that new claims dropped by 19,000 to a seasonally adjusted 457,000. That's slightly below economists' forecasts of 460,000. First-time requests for unemployment insurance have been stuck at about 450,000 since the beginning of this year. New claims dropped steadily last year after reaching a peak of 651,000 in March 2009. Many economists say initial claims need to fall closer to 425,000 to signal sustained job growth. The government says total number of people receiving benefits dropped 45,000 to 4.5 million.
Orders to U.S. factories for big-ticket manufactured goods declined in May as demand for commercial aircraft dropped off. But excluding transportation, orders rose. The Commerce Department says demand for durable goods fell 1.1 percent last month. It was the first decline in six months, following April's strong three percent increase. Without the volatile transportation sector, orders were up 0.9 percent. The increase was driven by a 5.6 percent uptick in orders for machinery. Non-transportation orders in April fell by 0.8 percent. More companies are investing in costly machinery as the recovery gains strength. As manufacturing continues to surge, companies are growing more confident. They are adding jobs, revving up production and buying more equipment.
Big businesses are about to compete for a piece of the action in the Texas lottery. International lottery companies are presenting proposals to the state by Tuesday showing how they would oversee the Texas lottery if they land its lucrative operations contract. The Texas contract is currently held by Gtech rarely comes up for bid, so the stakes are high for the competing businesses and taxpayers. Each year the state's lottery generates some $3 billion in ticket sales, and the operator of the contract makes about $100 million per year. Three firms--Scientific Games, Intralot and Gtech--are likely to submit bids. All year the bidding process has been caught in conflict-of-interest questions that still linger.
Policyholders with the Texas Windstorm Insurance Association will be on their own for the cost of evacuation from hurricanes. The Galveston County Daily News reports that the association does pay some evacuation and additional living expenses when wind damage keeps policyholders out of their properties. Insurance Commissioner Mike Geeslin had asked the TWIA to consider providing coverage for evacuations and additional living expenses for damages caused by perils other than wind. Association Manager Jim Oliver says such coverage is not priced into the policies. The TWIA board also approved five percent premium rate increases for commercial and residential policies, effective January 1st.
A wind turbine company is building a five-megawatt wind farm and manufacturing plant south of Clovis. Vert-i-go Wind, a subsidiary of Abundant Energy of Plano, broke ground for the plant just south of the Clovis city landfill. Abundant Energy CEO Kurt Knapton says the company bought six acres in January and hopes to built one turbine per acre. Vert-i-go builds midsize vertical-axis wind turbines. Officials say the wind farm will create 60 jobs by 2013. Knapton says the first turbine is expected to be finished in time to take advantage of winter, the windiest season. The company also has leased an 11,000-square-foot building in Clovis as an assembly facility.
A Russian news agency reports that a Moscow court has dropped charges against a gravely ill executive from the dismantled oil giant Yukos. The Ria Novosti agency said prosecutors at the Simonovsky court in Moscow says that embezzlement, tax evasion and money laundering charges against Vasily Alexanyan have been dropped “because of their expiration.” Alexanyan, who was arrested in 2006 and released on bail in 2008, suffers from AIDS, tuberculosis and is nearly blind. He was a vice president at Yukos, whose owner Mikhail Khodorkovsky is serving an eight-year sentence on fraud and tax evasion charges and is standing trial in Moscow on embezzlement charges. Their cases were widely seen as the Kremlin's punishment for Khodorkovsky's political ambitions.
Republicans in the Senate appear likely to kill legislation to provide continued unemployment checks to millions of people and provide states with billions of dollars to avert layoffs. It would be a bitter defeat for President Barack Obama and Capitol Hill Democrats, who have been trying to advance the measure for months as an insurance policy against a double dip recession. Majority leader Harry Reid says he would pull the measure from the floor if Democrats lose the vote. Democrats hope that political pressure from voters and business groups might eventually revive it.
World leaders are gathering in Toronto a year after making an unprecedented show of solidarity in efforts to address the global economic crisis. A repeat may be difficult, with a number of G-20 countries, including Britain, Japan and Australia, sending new leaders with deficit cutting mandates. The U.S. has appealed to G-20 governments not to end economic stimulus programs too quickly. But many are moving to slash spending and raise taxes to keep budget deficits in check and avoid the situation Greece faced last month when it was staring at the prospect of bankruptcy. Britain's new conservative government presented a package of hefty public spending cuts and tax increases earlier this week. Germany, France and Japan have also announced deficit-cutting plans in recent days. The summit's first session involving the G-8 countries--U.S., Canada, Britain, Germany, France, Italy and Japan--starts tomorrow, while the larger group of 20 nations, including developing powers China, Brazil and India, begin meeting Saturday.
Reliance Industries announced it's agreed to pay $1.3 billion for a stake in the shale gas assets of Irving-based Pioneer Natural Resources. The Indian oil and gas major seeks to expand its upstream business in North America. Reliance subsidiary Reliance Eagleford Upstream will pay $263 million upfront for a 45 percent interest in Pioneer's Eagle Ford shale acreage in South Texas--representing 118,000 acres of the 263,000 acre field. Reliance says the area holds about 10 trillion cubic feet of gas equivalent. In April, Reliance agreed to pay $1.7 billion for a 40 percent stake in atlas energy's Marcellus shale acreage in West Virginia, Pennsylvania and New York states.
Mortgage rates fell this week to the lowest level on record, giving consumers added incentive to lock in low payments on home purchases and refinanced purchases. Mortgage company Freddie Mac says the average rate for 30-year fixed loans sank to 4.69 percent, from 4.75 percent last week. That's the lowest since Freddie Mac began tracking rates in 1971. The previous record of 4.71 percent was set in December. Rates for 15-year and five year mortgages also hit lows. Mortgage rates have fallen over the past two months. Investors wary of the European debt crisis and the turbulent stock market have shifted money into the safety of treasury bonds, driving down yields. Mortgage rates tend to track the yields on long-term treasury debt.
The Federal Reserve struck a more cautious tone about the strength of the U.S. economic recovery, apparently noting the risks arising from Europe's debt crisis. Wrapping up a two-day meeting, the Fed in a 9-1 decision retained its pledge to hold rates at record-low levels for an “extended period.” The central bank hopes to foster growth without creating inflation. While not mentioning Europe by name, the Fed said “financial conditions have become less supportive of economic growth…largely reflecting developments abroad.”
Carnival Cruise Lines says it will return to pre-Katrina capacity levels at the port of New Orleans when it positions two of its ships there to operate year-round starting next year. Officials say the 2,974-passenger Carnival Conquest and 2,052-passenger Carnival Ecstasy will be moved from their current berths in Galveston to New Orleans for departures beginning in fall 2011. Carnival's president and chief executive, Gerry Cahill, says that the move is a positive indicator of the city's continued growth and recovery since Hurricane Katrina struck August 29th, 2005. He says the ships are projected to carry nearly 340,000 passengers annually from New Orleans--more than any other cruise line. Cahill says they will move the line's current New Orleans-based ship, the Carnival Triumph, to Galveston.