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Bankers and Traders in Vast Insider Trading Probe

November 25, 2010 Leave a comment

By SUSAN PULLIAM, MICHAEL ROTHFELD,JENNY STRASBURG and GREGORY ZUCKERMAN 

Federal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders, and analysts across the nation, according to people familiar with the matter.

OnTheInside_BW

OnTheInside_BW

OnTheInside_BW

The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year-end, they say.

The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say.

One focus of the criminal investigation is examining whether nonpublic information was passed along by independent analysts and consultants who work for companies that provide “expert network” services to hedge funds and mutual funds. These companies set up meetings and calls with current and former managers from hundreds of companies for traders seeking an investing edge.

Among the expert networks whose consultants are being examined, the people say, is Primary Global Research LLC, a Mountain View, Calif., firm that connects experts with investors seeking information in the technology, health-care and other industries.

“I have no comment on that,” said Phani Kumar Saripella, Primary Global’s chief operating officer.

Primary’s chief executive and chief operating officers previously worked at Intel Corp., according to its website.

In another aspect of the probes, prosecutors and regulators are examining whether Goldman Sachs Group Inc. bankers leaked information about transactions, including health-care mergers, in ways that benefited certain investors, the people say. Goldman declined to comment.

Independent analysts and research boutiques also are being examined. John Kinnucan, a principal at Broadband Research LLC in Portland, Ore., sent an email on Oct. 26 to roughly 20 hedge-fund and mutual-fund clients telling of a visit by the Federal Bureau of Investigation.

“Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information,” the email said. “(They obviously have been recording my cell phone conversations for quite some time, with what motivation I have no idea.) We obviously beg to differ, so have therefore declined the young gentleman’s gracious offer to wear a wire and therefore ensnare you in their devious web.”

The email, which Mr. Kinnucan confirms writing, was addressed to traders at, among others: hedge-fund firms SAC Capital Advisors LP and Citadel Asset Management, and mutual-fund firms Janus Capital Group, Wellington Management Co. and MFS Investment Management.

SAC, Wellington and MFS declined to comment; Janus and Citadel didn’t immediately comment. It isn’t known whether clients are under investigation for their business with Mr. Kinnucan.

The investigations have been conducted by federal prosecutors in New York, the FBI and the Securities and Exchange Commission. Representatives of the Manhattan U.S. Attorney’s office, the FBI and the SEC declined to comment.

Another aspect of the probe is an examination of whether traders at a number of hedge funds and trading firms, including First New York Securities LLC, improperly gained nonpublic information about pending health-care, technology and other merger deals, according to the people familiar with the matter.

Some traders at First New York, a 250-person trading firm, profited by anticipating health-care and other mergers unveiled in 2009, people familiar with the firm say.

A First New York spokesman said: “We are one of more than three dozen firms that have been asked by regulators to provide general information in a widespread inquiry; we have cooperated fully.” He added: “We stand behind our traders and our systems and policies in place that ensure full regulatory compliance.”

Key parts of the probes are at a late stage. A federal grand jury in New York has heard evidence, say people familiar with the matter. But as with all investigations that aren’t completed, it is unclear what specific charges, if any, might be brought.

[PROBEjump]

The action is an outgrowth of a focus on insider trading by Preet Bharara, the Manhattan U.S. Attorney. In an October speech, Mr. Bharara said the area is a “top criminal priority” for his office, adding: “Illegal insider trading is rampant and may even be on the rise.” Mr. Bharara declined to comment.

Expert-network firms hire current or former company employees, as well as doctors and other specialists, to be consultants to funds making investment decisions. More than a third of institutional investment-management firms use expert networks, according to a late 2009 survey by Integrity Research Associates in New York.

The consultants typically earn several hundred dollars an hour for their services, which can include meetings or phone calls with traders to discuss developments in their company or industry. The expert-network companies say internal policies bar their consultants from disclosing confidential information.

Generally, inside traders profit by buying stocks of acquisition targets before deals are announced and selling after the targets’ shares rise in value.

The SEC has been investigating potential leaks on takeover deals going back to at least 2007 amid an explosion of deals leading up to the financial crisis. The SEC sent subpoenas last autumn to more than 30 hedge funds and other investors.

“Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information…. We obviously beg to differ, so have therefore declined the young gentleman’s gracious offer to wear a wire and therefore ensnare you in their devious web.” John Kinnucan, of Broadband Research, in an Oct. 26 email to clients

Some subpoenas were related to trading in Schering-Plough Corp. stock before its takeover by Merck & Co. in 2009, say people familiar with the matter. Schering-Plough stock rose 8% the trading day before the deal plan was announced and 14% the day of the announcement.

Merck said it “has a long-standing practice of fully cooperating with any regulatory inquiries and has explicit policies prohibiting the sharing of confidential information about the company and its potential partners.”

Transactions being focused on include MedImmune Inc.’s takeover by AstraZeneca PLC in 2007, the people say. MedImmune shares jumped 18% on April 23, 2007, the day the deal was announced. A spokesman for AstraZeneca and its MedImmune unit declined to comment.

Investigators are also examining the role of Goldman bankers in trading in shares of Advanced Medical Optics Inc., which was taken over by Abbott Laboratories in 2009, according to the people familiar with the matter. Advanced Medical Optics’s shares jumped 143% on Jan. 12, 2009, the day the deal was announced. Goldman advised MedImmune and Advanced Medical Optics on the deals.

A spokesman for AstraZeneca and its MedImmune unit declined to comment.

In subpoenas, the SEC has sought information about communications—related to Schering-Plough and other deals—with Ziff Brothers, Jana Partners LLC, TPG-Axon Capital Management, Prudential Financial Inc.’s Jennison Associates asset-management unit, UBS AG’s UBS Financial Services Inc. unit, and Deutsche Bank AG, according to subpoenas and the people familiar with the matter.

Representatives of Ziff Brothers, Jana, TPG-Axon, Jennison, UBS and Deutsche Bank declined to comment.

Among hedge-fund managers whose trading in takeovers is a focus of the criminal probe is Todd Deutsch, a top Wall Street trader who left Galleon Group in 2008 to go out on his own, the people close to the situation say. A spokesman for Mr. Deutsch, who has specialized in health-care and technology stocks, declined to comment.

Prosecutors also are investigating whether some hedge-fund traders received inside information about Advanced Micro Devices Inc., which figured prominently in the government’s insider-trading case last year against Galleon Group hedge fund founder Raj Rajaratnam and 22 other defendants.

Fourteen defendants have pleaded guilty in the Galleon case; Mr. Rajaratnam has pleaded not guilty and is expected to go to trial in early 2011.

Among those whose AMD transactions have been scrutinized is hedge-fund manager Richard Grodin. Mr. Grodin, who received a subpoena last autumn, didn’t return calls. An AMD spokesman declined to comment.

Write to Susan Pulliam at susan.pulliam@wsj.com, Michael Rothfeld at michael.rothfeld@wsj.com, Jenny Strasburg at jenny.strasburg@wsj.com and Gregory Zuckerman at gregory.zuckerman@wsj.com

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WikiLeaks Announces Release 7x the Size of the Iraq War

November 23, 2010 Leave a comment

Picture of Julian Assange during a talk at 26C3

Picture of Julian Assange during a talk at 26C3

Logs

Stan Schroeder

WikiLeaks has announced an important release on its Twitter account, claiming it’ll be seven times bigger than the Iraq war logs, which are widely considered to be the biggest military leak in history.

“Next release is 7x the size of the Iraq War Logs. intense pressure over it for months. Keep us strong” was the message posted to the Wikileaks Twitter account earlier today.

The message was followed by an even bolder statement two hours later: “The coming months will see a new world, where global history is redefined.”

WikiLeaks is an organization that publishes submissions of otherwise unavailable documents, keeping the sources anonymous. It has published nearly 500,000 secret U.S. documents about the wars in Iraq and Afghanistan.

Recently, Wikileaks founder Julian Assange found himself in the center of a rape scandal. The rape charges against him were initially dropped, but the case still looms over Assange’s head, with the Swedish court recently approving a motion to bring him into custody for questioning.

No details about the upcoming release have been revealed, but the fact that it was mentioned in the same context as the Iraq war logs points to another military-related leak. What do you think Wikileaks will announce? Please, share your opinions in the comments.

Copyright © 2010 Yahoo! Inc. All rights reserved.

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Chinese Supercomputer Likely to Prompt Unease in U.S.

October 28, 2010 1 comment

  • The Wall Street Journal
  • By DON CLARK

    A newly built supercomputer in China appears poised to take the world performance lead, another sign of the country’s growing technological prowess that is likely to set off alarms about U.S. competitiveness and national security.

    The system was designed by China’s National University of Defense Technology and is housed at the National Supercomputing Center in the city of Tianjin. It is part of a new breed that exploits graphics chips more commonly used in playing videogames—supplied by Nvidia Corp.—as well as standard microprocessors from Intel Corp.

    Supercomputers are massive machines that help tackle the toughest scientific problems, including simulating commercial products like new drugs as well as defense-related applications such as weapons design and breaking codes. The field has long been led by U.S. technology companies and national laboratories, which operate systems that have consistently topped lists of the fastest machines in the world.

    [cnvidia1028] NVIDIAThe Tianhe-1A Supercomputer, located at National Supercomputer Center in Tianjin, China, is one of the fastest supercomputers in the world.

    But Nvidia says the new system in Tianjin—which is being formally announced Thursday at an event in China—was able to reach 2.5 petaflops. That is a measure of calculating speed ordinarily translated into a thousand trillion operations per second. It is more than 40% higher than the mark set last June by a system called Jaguar at Oak Ridge National Laboratory that previously stood at No. 1 on a twice-yearly ranking of the 500 fastest supercomputers.

    “I don’t know of another system that is going to be anywhere near the performance and the power of this machine” in China, said Jack Dongarra, a supercomputer expert on the Oak Ridge research staff who is a professor at the University of Tennessee and recently inspected the system in Tianjin last week. “It is quite impressive.”

    The development was not altogether unexpected. China placed 24 systems in the so-called Top 500 supercomputer ranking last June; a system called Nebulae, for example, took second place that also used chips from Nvidia and Intel.

    Editors’ Deep Dive: Businesses Put Supercomputers to Work

    Access thousands of business sources not available on the free web. Learn More

    But Mr. Dongarra and other researchers said the machine should nevertheless serve as a wake-up call that China is threatening to take the lead in scientific computing—akin to a machine from Japan that took the No. 1 position early in the past decade and triggered increased U.S. investment in the field.

    “It’s definitely a game-changer in the high performance market,” said Mark Seager, chief technology officer for computing at Lawrence Livermore National Laboratory. “This is a phase transition, representative of the shift of economic competitiveness from the West to the East.”

    Nearly all components of the high-profile Japanese system, called the Earth Simulator, were created in Japan. By contrast, most of the Tianjin system relies on chips from Intel and Nvidia, which are both based in Santa Clara, Calif. So U.S. customers could presumably construct a system with similar performance, noted Horst Simon, deputy lab director at Lawrence Berkeley Lab.

    But Mr. Dongarra noted that communications chips inside the machine were proprietary and designed in China, and the country is also working on its own microprocessors.

    Moreover, while the Japanese system was a single machine, Tianjin is part of a multi-year strategy by China to develop a range of machines to create a dominant position in both military and commercial applications. “In that sense, I would say this is a much more important event than the Earth Simulator,” Mr. Simon said.

    The new supercomputer will be operated as an “open access” system, available to other countries outside of China to use for large scale scientific computation, said Ujesh Desai, an Nvidia vice president of product marketing.

    It reflects a major design shift to use graphics chips to help accelerate the number-crunching functions most often carried out by so-called x86 chips, which evolved from personal computers and have long dominated supercomputing. Advanced Micro Devices, which makes both graphics chips and x86 microprocessors, is another company besides Nvidia that is promoting the technology shift.

    Write to Don Clark at don.clark@wsj.com

    Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved

    This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit

    www.djreprints.com

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    The Independent Institute’s MyGovCost.org Gives Voters A Government Cost Calculator:

    October 26, 2010 Leave a comment

    100 Swan Way, Oakland, CA 94621-1428 • Phone: 510-632-1366 • Fax: 510-568-6040 • E-mail: info@independent.orgwww.independent.org
    FOR IMMEDIATE RELEASE Contact: Lindsay Boyd
    202.225.7722, lboyd@independent.org

    Voting on Nov. 2nd? Find Out How Much Is Really at Stake
    October 25, 2010— In 9 days, you will have the opportunity to walk into a voting booth and make a choice. The health of our economy and financial responsibility of our representatives in Congress are two of the largest concerns being addressed by candidates on both sides of the aisle. The Independent Institute’s latest initiative, MyGovCost.org, demonstrates that regardless of your level of participation in this process on November 2nd, it is important to be educated and informed.
    Prior to submitting that ballot, you should know- how much is Washington’s spending costing you?

    The Government Cost Calculator is a tool developed at MyGovCost.org that enables you, the voter, to receive a personalized report on what Washington’s spending is costing you and how much you’ll be liable for in the growing national debt. MyGovCost Director, Emily Skarbek, encourages voters to utilize the Calculator to become informed about what federal spending programs are really costing.  The calculator enables anyone to see how much of their tax dollar go towards funding specific programs so that voters can see what they are forgoing by voting for increased expenditures at the federal level.

    For instance, a recent college graduate making $40,000 per year will be expected to pay $734,783 in federal taxes, and even then the federal government deficit and debt will continue to skyrocket. Interestingly, as demonstrated by the Government Cost Calculator, that same individual could have earned $5,042,961 if allowed to privately invest those dollars instead. Those hoping to enter retirement are also being faced with a similarly gloomy financial forecast. At 70 years old, those who are expecting to keep their spending in order during their retirement years face an average of $1, 207 in monthly taxes if current spending trends continue.

    So, for those of you hoping to “make your vote count” on November 2nd, don’t go to the ballot box without first arming yourself with the facts. Use the Government Cost Calculator at MyGovCost.org to crunch the numbers with different scenarios depending on your stage in life. Break the spending down by projects. Most importantly, share your results with friends who want to be better informed about excessive federal spending on November 2nd.

    To schedule an interview with MyGovCost.org Director, Emily Skarbek, please contact Lindsay Boyd, Director of Communications, at 202.225.7722 or lboyd@independent.org.
    For More Information, please visit www.mygovcost.org. Also look for us on Twitter at www.twitter.com/my govcost and Facebook at www.facebook.com/mygovcost!

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    Chile Mine Collapse: Drill is 40 Meters Away from Trapped Miners

    October 8, 2010 Leave a comment

    Officials address the media at the San Jose Mine, Chile, October 8, 2010.

    (Credit: CBS/Fernando Suarez)

    Thirty-three men have been trapped 700 meters below ground since the San Jose mine collapse on Aug. 5, 2010. CBS News‘ Fernando Suarez reports from the site in Chile.

    SAN JOSE MINE, Chile –

    Officials at the San Jose Mine in Chile today said the Plan B drill is 40 meters away from breaking through to the trapped miners and a break could come as early as this evening.

    Once the drill reaches the miners a decision will be made whether or not to case the hole. Casing the hole is not only risky, but can add an additional four to 10 days to complete. Chilean Mining Minister Laurence Golborne said the actual extraction process alone could take two days. Golborne cautioned that breaking through may be good news, but no one is out yet.

    Complete Coverage: Chile Mine Collapse

    The drill bit was changed early this morning to ensure that it’s good enough for the rescue. The speed of the drill will slow down as it approaches the miners to ensure they don’t penetrate too deeply.

    Follow Fernando Suarez on Twitter

    Health Minister Jamie Manalich said the miners are split into 3 groups. The strongest, more agile and skilled miners who can offer assistance and information to the surface team will be out first. Then, the more vulnerable miners: those who are sick, older, and heavier. The remaining “normal” miners will be the third group. Two rescue workers, a rescue miner and a doctor, will go down first to evaluate the miners.

    The men have been trapped 2,300 feet below ground since the mine caved in August 5, 2010.

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    The Tea Party/GOP Would Hate Our Actual Founders

    October 1, 2010 Leave a comment

    Benjamin Franklin

    Benjamin Franklin

    The Huffington Post October 1, 2010

    This is the print preview: Back to normal view »

    Harvey Wasserman

    Harvey Wasserman

    Author, SOLARTOPIA! Our Green-Powered Earth

    Posted: October 1, 2010 01:11 PM

    This is a Greco-Roman nation, gathered in a Hodenosaunee longhouse.

    As they wrap themselves in the Constitution they mean to shred, that is the self-evident Truth the Tea/GOP Party ultimately cannot face.

    Our legal godfathers — the ones Glenn Beck loves to conjure — were Deistic liberal humanists whose core beliefs he deeply abhors.

    They dumped that tea because they despised the corporation that owned it and the idea of empire it (and today’s corporate-military right) stood for.

    The grassroots farmers that made the Revolution were free-thinking hemp growers. Their favorite scribe, Tom Paine, was the son of a Quaker whose Age of Reason assaulted the church with unsurpassed fury. Today’s Tea/GOP would have it burned.

    Our greatest genius, Ben Franklin, was a proud and joyous sexual adventurer. His very presence today would induce howls of (envious) outrage from the religious right.

    It was Franklin who most loved Native America. He introduced himself to the French as “an American savage.” He stamped the Hodenosaunee (Iroquois) gifts of personal freedom and a democratic confederation into the soul of the new nation.

    More formally, our tradition of direct voting, still alive in many New England towns, where the Revolution was born, was conceived in Athens, 508 BC. The Republic (“if you can keep it,” as Franklin warned) came from Rome, 509 BC.

    The federal structure adopted in Philadelphia in the summer of 1787, was — with Franklin’s mentoring — based on the Iroquois Confederacy. That union was born at latest 1540 AD. It sustained a functioning democracy for at least 250 years, still longer than the US has been in existence.

    The matriarchal Hodenosaunee were defined by a love of nature and communal land stewardship. Open dialog was as easily accepted as abortion and homosexuality. Along with so many other lethal diseases, Original Sin was an unwanted import.

    It is the humanistic liberalism of America’s Founders that STILL enrages today’s neo-Puritan Tea/GOP. The Jefferson they love to claim fathered at least five children with his slave Sally Hemings, thirty years his junior. Some were conceived while he lived “alone” in the White House.

    He and Franklin and Madison and Paine had no time for the Christian faith. It’s by their intelligent design that Jesus appears nowhere in the Constitution. Their liberal Deism said a Creator got the universe going, installed the laws of nature, endowed humans with free will (and inalienable rights), then left.

    Franklin’s disdain for church services spices his autobiography. Jefferson clipped all references to a divinity for Jesus out of his personal Bible. Paine’s Age of Reason still enrages the official church. Madison’s First Amendment enshrines disdain for an official religion. Unitarianism in all its liberal diversity was shared by presidents two through six, including two Adams’s, Jefferson, Madison and Monroe.

    Their system of checks and balances was based on the Socratic proposition that with the freedom to dialog, human reason will prevail. Thus the First Amendment’s very first phrase exalts freedom from Religion, ie separation of church and state, a phrase coined by Jefferson, demanded by the new nation as a whole.

    Like virtually all other American farmers, Washington and Jefferson raised serious quantities of hemp, and made good money from it. Franklin owned a paper mill that ran on it. All may well have smoked its psycho-active cousin, now known as marijuana. If you told them the nation they founded would make this versatile herb illegal, they would laugh at you.

    They’d be equally horrified to hear the Foxist Tea/GOP claiming them as icons in a sectarian crusade for repression and empire.

    Today’s religious right is an unholy fusion of theocratic authoritarianism — which our Founders hated above all — and corporate tyranny, whose tea they pitched in Boston harbor. Along with George III, there’s nothing they loathed more than the anti-human hypocrisy we hear from the Foxist Legion.

    Likewise, Beck, Pailn, Limbaugh, O’Reilly and their ilk would have shrieked with rage at the actual Franklin and Paine, Jefferson and Madison, not to mention the populist farmers and sailors, workers and women who fought and died for the Revolution we all Revere (yes, him too!).

    So next time those Tea/GOP phonies gaze off in the distance to claim kinship with the Founders, remind everyone you know who really did win that Revolution and write that Bill of Rights.

    Those hemp-growing, tree-hugging, corporate-hating deistic free loving and free thinking present-at-the-creation Americans believed above all that the Truth would keep us free.
    Now more than ever, it’s our patriotic duty to prove them right.

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