Toronto mayor to stay in power pending appeal of ouster

TORONTO (Reuters) – Toronto Mayor Rob Ford can stay in power pending an appeal of a conflict of interest ruling that ordered him out of his job as leader of Canada’s biggest city, a court ruled on Wednesday.

Madam Justice Gladys Pardu of the Ontario Divisional Court suspended a previous court ruling that said Ford should be ousted. Ford’s appeal of that ruling is set to be heard on January 7, but a decision on the appeal could take months.

Justice Pardu stressed that if she had not suspended the ruling, Ford would have been out of office by next week. “Significant uncertainty would result and needless expenses may be incurred if a by-election is called,” she said.

If Ford wins his appeal, he will get to keep his job until his term ends at the end of 2014. If he loses, the city council will either appoint a successor or call a special election, in which Ford is likely to run again.

“I can’t wait for the appeal, and I’m going to carry on doing what the people elected me to do,” Ford told reporters at City Hall following the decision.

Ford, a larger-than-life character who took power on a promise to “stop the gravy train” at City Hall, has argued that he did nothing wrong when he voted to overturn an order that he repay money that lobbyists had given to a charity he runs.

Superior Court Justice Charles Hackland disagreed, ruling last week that Ford acted with “willful blindness” in the case, and must leave office by December 10.

Ford was elected mayor in a landslide in 2010, but slashing costs without cutting services proved harder than he expected, and his popularity has fallen steeply.

He grabbed unwelcome headlines for reading while driving on a city expressway, for calling the police when a comedian tried to film part of a popular TV show outside his home, and after reports that city resources were used to help administer the high-school football team he coaches.

The conflict-of-interest drama began in 2010 when Ford, then a city councillor, used government letterhead to solicit donations for the football charity created in his name for underprivileged children.

Toronto’s integrity commissioner ordered Ford to repay the C$ 3,150 ($ 3,173) the charity received from lobbyists and companies that do business with the city.

Ford refused to repay the money, and in February 2012 he took part in a city council debate on the matter and then voted to remove the sanctions against him – despite being warned by the council speaker that voting would break the rules.

He pleaded not guilty in September, stating that he believed there was no conflict of interest as there was no financial benefit for the city. The judge dismissed that argument.

In a rare apology after last week’s court ruling, he said the matter began “because I love to help kids play football”.

Ford faces separate charges in a C$ 6 million libel case about remarks he made about corruption at City Hall, and is being audited for his campaign finances. The penalty in the audit case could also include removal from office.

(Reporting by Claire Sibonney; Editing by Janet Guttsman, Russ Blinch, Nick Zieminski; and Peter Galloway)

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Apple’s shares swallow biggest loss in four years

NEW YORK/SAN FRANCISCO (Reuters) – Apple Inc shares tumbled more than 6 percent on Wednesday, chalking up their biggest single-day loss in four years as fears grow about intensifying competition in the mobile device market.

Investors and analysts blamed the sell-off on a mix of factors, including a forecast by an influential research firm that the iPad maker is continuing to cede ground to rival Google Inc’s Android gadgets, and unconfirmed reports that at least one major stock-clearing house was raising margin requirements on Apple stock trades.

Analysts also cited fears about a hike in the capital gains tax in 2013 in the event that ongoing Washington fiscal negotiations fail, as well as news that Nokia had beat Apple to the punch by striking a deal to sell its flagship Lumia through China Mobile, that country’s largest wireless carrier.

Wednesday’s drop rounded off a bleak 10 weeks for the most valuable U.S. company.

The stock was one of the day’s biggest percentage losers on the S&P 500, shedding $ 35 billion of market value as more than 37 million shares changed hands — blowing past the company’s average daily volume over 50 days of 21 million.

Apple‘s shares, once among the most desirable of portfolio holdings, have headed steadily lower since September on growing uncertainty about the company’s ability to fend off unprecedented competition. This year saw a surge in sales of Amazon.com Inc’s cheaper Kindle Fire and Microsoft Corp’s first foray into the tablet market with its Surface.

Meanwhile, Samsung Electronics continues to chip away at the iPad‘s dominance with its Galaxy line.

The assault on Apple‘s consumer-electronics home turf presents a stiff challenge for CEO Tim Cook, who was elevated shortly before the death of Silicon Valley legend Steve Jobs and is now charged with keeping the world’s largest technology company humming.

“This is not going to be a short-term trend. This is a management test, of how well they can perform without Steve Jobs,” said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago. Referring to Apple‘s new iPad mini, which is only a smaller version of the existing iPad, Battle said the company needs “another home run” for shares to return to levels around $ 700.

“They need another new product that hits it out of the park. Without that, they could get a gradual grind-down in confidence,” he said.

On Wednesday, research firm International Data Corp said Apple most likely shed market share in the tablet computer space in 2012. Its worldwide tablet market share will slip to 53.8 percent in 2012 from 56.3 percent in 2011, while Android products would increase their share to 42.7 percent from 39.8 percent, IDC said.

Concerns that tax rates on dividends and capital gains may rise next year were also cited as contributing to the Apple sell-off.

The stock’s massive market value meant Apple was almost single-handedly responsible for Wednesday’s 1.1 percent decline in the Nasdaq 100 Index.

Apple is still up 33 percent this year, but is down nearly 24 percent from its record high of $ 705.07, hit on September 21. The stock slid more than 6.4 percent on Wednesday to close at $ 538.7923.

BEFUDDLING SLIDE

Some analysts were perplexed at the fall from favor in Apple stock, which has been a staple in almost all growth portfolios. The company is expected to deliver reliably high revenue and earnings expansion for years to come, and one in two tablets sold globally remains an iPad.

It is now gearing up for the introduction of its latest iPhone 5 and iPad mini in international markets. It will begin selling the iPhone 5 in 50 countries in December, including China and South Korea.

“Apple stock is significantly more volatile than its earnings and innovation stream,” said Daniel Ernst, analyst with Hudson Square Research. “And yet the wind blows slightly from the south instead of the east one particular morning, and the stock is down 6 percent.”

“It makes no sense. There are lines around the block for their products all around the world,” he added. “No other company has that.”

Separately, Nokia said it will partner with China Mobile, in a sales deal that will give the Finnish company an opportunity to win back Chinese market share from Apple‘s iPhone.

But some analysts continue to believe the dominant carrier in the world’s largest cellular market will eventually embrace the iPhone as well.

“China Mobile already carries multiple smartphones from multiple vendors. We continue to expect China Mobile to add the iPhone in the back half of 2013,” Piper Jaffray’s Gene Munster wrote in a research note.

While lines for the latest iPad model appeared lighter than usual when it hit stores in November, Apple said at the time that demand was so strong that it “practically sold out of iPad minis.” It sold 3 million of the new iPads — including the full-sized version — in the first three days on the market.

Some analysts suggested that investors also sold shares of Apple amid uncertainty over ongoing fiscal negotiations in Washington. If no agreement is reached on the issue, higher tax rates on dividends and capital gains are possible in 2013.

Investors who had hoped for a special dividend this year, as many other corporations have announced on expectations of higher tax rates next year, may be disappointed as time is running out.

“If you were expecting a special dividend by year end, that’s less likely to happen because its December 5,” said Colin Gillis, an analyst with BGC Partners.

The fear of higher taxes on capital gains also has prompted some investors to lock in profits now, particularly on a stock like Apple, which has posted gains of at least 25 percent for four consecutive years.

“Depending on what happens with the (U.S. fiscal negotiations), rates could rise next year or they could stay the same,” said Battle, of Performance Trust Capital. “They will not be lower, so if you’re an investor who has seen gains in Apple, it is better to take those gains this year rather than next.”

Tax selling “can take a life of its own,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

“Some taxable investors take the gains, that creates some negative momentum, institutional investors are heavily weighted the stock and reduce exposure.”

Some market participants also cited reports by media including CNBC, which Reuters could not confirm, that margin requirements on the trading of Apple stock had been raised by at least one clearing firm.

(Additional reporting by Charles Mikolajczak in New York and Doris Frankel in Chicago; Editing by Bernadette Baum, Andrew Hay, Leslie Adler and Ken Wills)

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Dueling Fiscal Cliff Deceptions

A fog of misinformation has settled on the fiscal cliff, as both House Speaker John Boehner and Treasury Secretary Timothy Geithner have traded conflicting, misleading and false statements in recent days on the president’s deficit-reduction plan:

• Geithner falsely claimed on “Fox News Sunday” that the president’s proposals to slow Medicare growth are “not shifting costs to seniors.” There are four proposals that would increase costs to some seniors by $ 32.9 billion over 10 years, beginning in 2017, including higher premiums and new fees and surcharges.


• Boehner, also on Fox News, wrongly stated that the administration has proposed “$ 400 billion worth of unspecified cuts.” The administration has itemized nearly $ 600 billion worth of what it calls “cuts and reforms to mandatory programs” — half of that from Medicare.


• Geithner exaggerates when he says the ratio of spending cuts to tax increases is “roughly 2 to 1.” The administration’s $ 3 trillion in “spending cuts” includes more than $ 800 billion on two wars financed by deficit spending and already set to end, and tens of billions in new or higher fees and surcharges described as “reforms.”


• Boehner and other GOP leaders claimed in a letter to Obama that the president’s “proposal calls for $ 1.6 trillion in new tax revenue, twice the amount you supported during the campaign.” But the fact is that Obama’s fiscal 2013 budget proposal calls for $ 1.6 trillion in new tax revenues — which his opponent, Mitt Romney, attacked during the campaign.


• Boehner repeatedly (and falsely) says the president’s fiscal 2013 budget plan will create “trillion-dollar deficits for as far as the eye can see.” It’s true the fiscal 2013 deficit is projected to be close to $ 1 trillion, but annual deficits would fall each year thereafter — dropping to $ 488 billion by Obama’s final year in 2017.

There is also much confusion on what exactly is in the president’s plan — despite Geithner’s briefing to Republican leaders and their staffs on Nov. 29.

Boehner says the administration has proposed more in new stimulus spending than it proposes in spending cuts. His office says the new stimulus spending could exceed $ 600 billion but the president proposes only $ 400 billion in spending cuts. The administration tells us that the stimulus package would not exceed $ 200 billion.

Obama’s Plan: Neither Painless nor Lacking Specifics

Geithner and Boehner have been the point men for their respective sides of the fiscal cliff debate.

Geithner briefed Republican leaders on Nov. 29 and made multiple TV appearances on Dec. 2 to talk about the president’s plan — which we detail in our Nov. 30 article, “Facing Facts on Fiscal Cliff.”

Geithner and Boehner both appeared on “Fox News Sunday” and each provided misleading information about the Obama administration’s proposed plan.

Geithner claimed that the president’s deficit reduction plan is about “strengthening Medicare, not shifting costs to seniors.” However, the president’s plan does shift some costs to seniors — mostly to higher-income beneficiaries, but also for all new beneficiaries.

There are four proposals, contained in both the president’s 2011 deficit-reduction plan and his fiscal 2013 budget, that would increase costs to seniors by $ 32.9 billion over 10 years. All four proposals would begin in 2017 — after Obama leaves office:

• Expanded means testing for Medicare Parts B and D Premiums. The administration proposes to increase premiums under Medicare Part B (medical insurance) and D (prescription drugs) for higher-income seniors by 15 percent and freeze the high-income thresholds at current levels “until 25 percent of beneficiaries under parts B and D are subject to these premiums.” In 2012, only 5.1 percent of Part B enrollees and 3 percent of Part D enrollees pay higher premiums based on income, according to the Kaiser Family Foundation. The current thresholds for higher premiums are $ 85,000 for individuals and $ 170,000 for couples. Kaiser estimates that the income thresholds for paying higher premiums by 2035 will be equivalent to about $ 47,000 for individuals and $ 94,000 for couples “in today’s adjusted inflation dollars.” Cost to seniors: $ 28 billion over 10 years (pages 34-35).


• Increased Medicare Part B deductible for new beneficiaries. The administration would increase the deductibles paid by new beneficiaries by $ 25 in 2017, 2019 and 2021. Cost to seniors: $ 2 billion over 10 years (page 35).


• A copay for Medicare home-health care for new beneficiaries. There’s currently no copay. This proposal would create a new copay of $ 100 for each “home health episode.” Cost to seniors: $ 350 million over 10 years (page 35).


• Medicare Part B premium surcharge for new beneficiaries who purchase Medigap coverage. The administration would impose a Part B premium surcharge for new beneficiaries who purchase “near first-dollar Medigap coverage.” Medigap policies cover Medicare’s out-of-pocket expenses, such as copays and deductibles. The administration’s plan says Medigap provides “less incentive” to make cost-efficient health care decisions. Cost to seniors: $ 2.5 billion over 10 years (page 35).

As he made the rounds of the other Sunday talk shows, Geithner gave an accurate — but incomplete — accounting of the president’s Medicare proposals. On “Meet the Press,” for example, Geithner said that “we’re proposing to modestly increase premiums for high income beneficiaries of Medicare.” But he did not mention that the president’s plan also raises costs for all new beneficiaries, not just those with high incomes.

For his part, Boehner twice criticized the administration for failing to provide detailed cuts, claiming the administration “put $ 400 billion worth of unspecified cuts that they’d be willing to talk about.” Geithner said that’s not true, claiming the administration has “proposed $ 600 billion of detailed reforms and savings, to our health care and other government programs.”

Boehner is wrong.

The president’s deficit-reduction plan, as proposed to Congress in September 2011, itemizes “nearly $ 580 billion in cuts and reforms to mandatory programs, of which $ 320 billion is savings from Federal health programs such as Medicare and Medicaid.” Those proposals are also listed in the president’s fiscal 2013 budget proposal in a section, beginning on page 23, titled “Cutting Waste, Reducing the Deficit.”

The Medicare proposals, for example, are a mix of reduced payments to certain providers, including teaching hospitals and post-acute care facilities — as well as the higher premiums and new fees for certain beneficiaries that we mentioned above.

White House spokesman Jay Carney made this point at a press briefing on the day of Geithner’s meeting with Republican leaders.

Carney, Nov. 29: [T]he President has put forward, in September of 2011 with his proposal to the so-called super committee, in his budget in February of 2012, very specific spending cuts, including savings from health care entitlement programs.

Spending Cuts vs. Tax Increases

Geithner and Obama, however, exaggerate the amount of spending cuts in the president’s plan.

On NBC’s “Meet the Press,” Geithner said, “We have laid out a very detailed plan of spending cuts, $ 600 billion dollars in spending in mandatory programs over 10 years.” The president made the same claim in a Dec. 4 interview with Bloomberg News, saying his proposal has “$ 600 billion in additional cuts in mandatory spending.”

It’s true that there’s nearly $ 600 billion in estimated savings from mandatory programs: $ 326 billion in health programs, including Medicare and Medicaid, and $ 254 billion in other programs, such as farm subsidies. But not all of these are “spending cuts,” and the administration’s own deficit-reduction plan doesn’t label them as such — instead calling them a combination of “cuts and reforms.”

There are tens of billions in new fees and surcharges and increased premiums in Medicare alone. Table S-10 of the revised fiscal 2013 budget proposal outlines numerous other new and higher fees under the section titled “Mandatory Initiatives and Savings.”

“Fox News Sunday” host Chris Wallace asked Geithner about the spending cuts-to-tax increase ratio in the president’s plan, and the Treasury secretary replied, “roughly 2 to 1.”

When we asked how Geithner arrived at his 2-to-1 ratio, Treasury told us there is roughly $ 1.6 trillion in new tax revenues (which is not in dispute) and $ 3 trillion in spending cuts — which is not quite 2-to-1, even if you accept the administration’s definition of cuts.

In addition to the $ 600 billion, the list of $ 3 trillion in “spending cuts” provided to us by the administration includes:

• The caps on discretionary spending approved in the Budget Control Act of 2011, which will reduce future spending by an estimated $ 1 trillion. Republicans don’t view these as new spending cuts, because these were approved in exchange for raising the debt ceiling in 2011 and they are not part of the current negotiations.


• An estimated savings of more than $ 800 billion from ending the wars in Iraq and Afghanistan. But as we have written before, Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, called this a “gimmick,” because the wars were financed by deficit spending and already set to end.


• About $ 600 billion in reduced debt service payments.

The administration’s $ 3 trillion in “spending cuts” also does not take into account its proposal for at least $ 200 billion in new stimulus spending — which, obviously, reduces the net savings.

Treasury declined to give us a detailed list of proposals for new spending, although it did confirm published reports that some of the elements of the stimulus plan could include an extension of the Social Security payroll tax holiday ($ 110 billion), infrastructure spending ($ 50 billion) and an unemployment benefits extension ($ 30 billion).

The Republicans, however, are also playing fast and loose with the facts when they calculate the ratio of spending cuts to tax increases.

In a Dec. 3 letter to the president outlining the GOP counterproposal for deficit reduction, Boehner and other GOP leaders said there is “four times as much tax revenue as spending cuts” in the president’s proposal.

The GOP math works like this: Obama’s proposal includes $ 1.6 trillion in new tax revenue and roughly $ 400 billion in spending cuts. In an email to us, Boehner spokesman Brendan Buck said that “when Sec. Geithner made his proposal to us, the number he used – repeatedly – was $ 400 billion.” However, as we mentioned earlier, on several Sunday talk shows, Geithner said the total savings comes to $ 600 billion over 10 years.

In part, the discrepancy is a matter of language. Republicans are saying “spending cuts” while Democrats are saying “savings,” “reforms” and “spending cuts.” But the more substantial difference between the Democrats’ and Republicans’ spending cuts-to-tax hike ratios is that Republicans do not count the $ 1 trillion in discretionary spending cuts agreed to in the Budget Control Act of 2011. The White House argues those are part of the ongoing negotiations to resolve a deficit crisis. Nor does the GOP include the $ 800 billion “saved” from ending the wars in Iraq and Afghanistan.

Stimulus Spending: How Much?

The two sides also disagree on how much the president’s plan would provide in new stimulus spending.

On Fox, Boehner claimed that “all of this stimulus spending would literally be more than the spending cuts that he was willing to put on the table.” Geithner said that is “not true.”

Who’s right? It’s hard to say since, as we mentioned earlier, the Obama administration has not provided specifics on its stimulus package.

Boehner’s claim assumes, again, that the Democratic plan is for $ 400 billion worth of spending cuts. His office released a comparison of the Obama and GOP plans that shows the administration seeking anywhere from $ 287 billion to $ 617 billion worth of new stimulus. The White House says it is seeking $ 200 billion.

According to the calculations provided by Boehner’s office, the White House offer included $ 110 billion for a payroll tax extension; $ 30 billion for unemployment insurance; $ 27 billion for stimulus tax extenders; $ 25 billion in unpaid expense related to the so-called “doctor fix” to prevent a cut in Medicare payments to doctors; and anywhere from $ 95 billion to $ 425 billion in infrastructure spending. According to Buck, in Geithner’s meeting with Republican leaders, the way White House officials described the infrastructure spending was $ 50 billion in the first year of a multi-year bill, and $ 25 billion above baseline for five years after that. “One could calculate that at $ 425 billion,” Buck said.

A Treasury official told us, however, that Obama’s proposal includes “around $ 200 billion in short-term measures to strengthen the economy and create jobs.”

“This could include a variety of measures such as infrastructure, the payroll tax, unemployment insurance benefits, refinance, and extension of 50 percent of bonus depreciation — and would very likely be a mix of revenues and spending,” the official said. “It’s not possible to allocate these measures until we know what this mix would look like, but it’s unlikely that they would greatly change the ratio. In addition, these are short-term jobs measures that would be in place only on a temporary basis. In thinking about the mix of revenues and spending, it makes more sense to focus on the permanent policies in the package.”

We can’t fact-check what was or was not offered in a closed-door session, but that explains the difference between the stimulus-to-spending cuts ratios cited by the opposing camps.

Double the Revenue?

In their letter to Obama, GOP House leaders also claimed that Obama’s “proposal calls for $ 1.6 trillion in new tax revenue, twice the amount you supported during the campaign.”

Did Obama renege on a campaign promise to raise just $ 800 billion in new revenue, and double his proposal during the fiscal cliff negotiations? In short, no. Obama has not wavered from his 2013 budget proposal, which included roughly $ 1.6 trillion in new revenues over 10 years.

Boehner’s spokesman said that during the campaign Obama only ever talked about allowing the Bush tax cuts to expire for upper-income earners — which would only generate about $ 850 billion.

“The average American (as well as every reporter I’ve quizzed on this) would say that the President campaigned on allowing the top rates expire,” Buck wrote to us in an email. “You’d be hard pressed to find him talking about going beyond that when campaigning. (He also regularly calls on Congress to pass a bill that does nothing more than allow top rates to expire.) That yields about $ 800 billion in revenue. He’s now asking for double that.”

Actually, just raising the rates on the top two income brackets is estimated to generate $ 442 billion over 10 years, according to the president’s budget plan (page 219). But there’s more to the Bush tax cuts than just marginal rates. Allowing all of the Bush tax cuts to expire for upper-income earners — as Obama has proposed — would also include such things as higher capital gains and dividends tax rates. Together, those come to about $ 850 billion.

But there was more revenue than that in Obama’s budget plan. For example, Obama proposed to reduce the value of itemized deductions and other tax preferences to 28 percent for families with incomes over $ 250,000. That is expected to generate $ 584 billion over 10 years — even more than raising the top tax rates (page 220).

It’s true that Obama made little or no mention of those particulars on the 2012 campaign trail — focusing instead on “everybody … doing their fair share” and “a balanced approach that says folks like me can pay a little bit more and go back to the Clinton rates.”

Neither, however, did Obama change course or distance himself from the fuller fiscal plan that he outlined in his budget.

More often, Obama vaguely said, “I’m not going to ask middle-class families to give up their deductions for owning a home, or raising their kids, or sending their kids to college just to pay for another millionaire’s tax cut.” He made no mention of upper-income deductions.

“He was campaigning on what he was asking for in the budget,” said Roberton Williams of the nonpartisan Tax Policy Center. “He may not have outlined the particulars during the campaign. But we always knew that was his plan, and that it was more than just tax rates.”

Mitt Romney knew. In fact, the Republican presidential nominee campaigned against it. In an April 17, 2012, press release, the Romney campaign warned: “In 2013, President Obama Will Usher In ‘One Of The Biggest Tax Increases In History’ By Passing $ 1.5 Trillion In New Tax Hikes.”

In other words, Obama may not have detailed his proposal to reduce the value of itemized deductions and other tax preferences to 28 percent for families with incomes over $ 250,000. That’s quite a mouthful for a campaign speech. But Obama never backed off his 2013 budget plan, which did lay out that proposal, and others, in greater detail.

Trillion-Dollar Deficits?

Lastly, Boehner falsely claimed on “Fox News Sunday” that the president’s budget will create “trillion-dollar deficits for as far as the eye can see.” He repeated the claim at a Dec. 5 press conference.

It’s true that the fiscal 2013 deficit under the president’s proposed budget would be close to $ 1 trillion, but the deficit would fall steadily after that for the next three years — dropping to $ 488 billion by Obama’s final year in 2017, according to the nonpartisan Congressional Budget Office.

Boehner, Dec. 2: We have a debt burden that’s crushing us, and it is — you look at the president’s budget, we’ve got trillion-dollar deficits for as far as the eye can see.

The federal government has run trillion-dollar deficits for four consecutive years, so it’s not partisan hyperbole when he speaks of “a debt burden that’s crushing.” However, he does misstate the facts when he speaks of future deficits.

In its analysis of the president’s proposed budget for fiscal 2013, CBO projects an end to the string of $ 1 trillion deficits in 2013 — but just barely. CBO estimates the deficit at $ 977 billion in 2013 and dropping every year thereafter until it reaches $ 488 billion by 2017. At that point, deficits are projected to rise again — but not reach $ 1 trillion. The highest the deficit would reach from 2014 to 2022 would be $ 728 billion in 2022. (See Table 1.)

– Eugene Kiely and Robert Farley

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Exclusive: HSBC might pay $1.8 billion money laundering fine – sources

NEW YORK/WASHINGTON (Reuters) – HSBC Holdings Plc might pay a fine of $ 1.8 billion as part of a settlement with U.S. law-enforcement agencies over money-laundering lapses, according to several people familiar with the matter.

The settlement with Europe’s biggest bank – which could be announced as soon as next week – will likely involve HSBC entering into a deferred prosecution agreement with federal prosecutors, said the sources, who spoke on condition of anonymity.

The potential settlement, which has been in the works for months, is emerging as a test case for just how big a signal U.S. prosecutors want to send to try to halt illicit flows of money moving through U.S. banks.

An HSBC spokesman said: “We are cooperating with authorities in ongoing investigations. The nature of discussions is confidential.”

HSBC said on November 5 that it set aside $ 1.5 billion to cover a potential fine for breaching anti-money laundering controls in Mexico and other violations, although Chief Executive Stuart Gulliver said the cost could be “significantly higher.

In regulatory filings, HSBC has said it could face criminal charges. But similar U.S. investigations have culminated in deferred prosecution deals, where law-enforcement agencies delay or forgo prosecuting a company if it admits wrongdoing, pays a fine and agrees to clean up its compliance systems. If the company missteps again, the Justice Department could prosecute.

A deferred prosecution agreement could raise questions over whether HSBC is simply paying a big fine and nothing more, said Jimmy Gurule, a former enforcement official at the U.S. Treasury.

It would make a “mockery of the criminal justice system,” said Gurule, who is now a University of Notre Dame law-school professor.

In his view, the only way to really catch the attention of banks is to indict individuals.

“That would send a shockwave through the international finance services community,” Gurule said. “It would put the fear of God in bank officials that knowingly disregard the law.”

An HSBC settlement, long rumored, has been slow in coming. Inside the Justice Department, prosecutors in Washington, D.C. and West Virginia argued over how to best investigate HSBC. According to documents reviewed by Reuters, the U.S. Attorney’s office in Wheeling, West Virginia, was prepared as far back as 2010 to indict HSBC and include more than 170 money laundering counts.

Prosecutors in Washington ultimately took charge.

In July, the U.S. Senate Permanent Subcommittee on Investigations released a report saying HSBC allowed clients to move shadowy funds from Mexico, Iran, the Cayman Islands, Saudi Arabia and Syria.

The use of deferred prosecution agreements has surged in recent years because Justice Department officials believe they give prosecutors an option aside from indicting a company or dropping a case.

According to a report in May by the Manhattan Institute for Policy Research, a conservative-leaning think tank, there have been 207 deferred or non-prosecution agreements since 2004.

The agreements “have become a mainstay of white collar criminal law enforcement,” U.S. Assistant Attorney General Lanny Breuer said in September during an appearance at the New York City Bar Association.

“I’ve heard people criticize them and I’ve heard people praise them. DPAs have had a truly transformative effect on particular companies and, more generally, on corporate culture across the globe.”

If U.S. prosecutors agree to a deferred agreement, they still could wield a powerful legal tool by accusing the bank of laundering money.

That would be a much more serious charge than if prosecutors, in a deferred agreement, charged HSBC with criminal violations of the Bank Secrecy Act, a law that requires banks to maintain programs that root out suspicious transactions.

In March 2010, for example, Wells Fargo & Co’s Wachovia entered into a deferred prosecution agreement to pay $ 160 million as part of a Justice Department probe that examined how drug traffickers moved money through the bank. Wachovia was accused of violating the Bank Secrecy Act, a decision that prompted criticism from some observers who thought a money laundering charge should have been employed and individual bankers prosecuted.

A charge of money laundering would be a rare move by the Justice Department and would send a signal to other big banks that the agency is intent on cracking down on dirty money moving through the U.S. financial system.

(This story corrects month the Senate report was published to July in paragraph 13)

(Reporting by Carrick Mollenkamp and Brett Wolf; Additional reporting by Emily Flitter and Aruna Viswanatha)

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Amazon launches Kindle content service for kids

NEW YORK (AP) — Amazon is launching a subscription service for children’s games, videos and books aimed at getting more kids to use its Kindle Fire tablet devices.

Amazon.com Inc. plans to announce Wednesday that the Kindle FreeTime Unlimited service will be available in the next few weeks as part of an automatic software update.

Amazon said subscribers will have access to “thousands” of pieces of content, though the company did not give a specific number. Kids will be able to watch, play and read any of the content available to them as many times as they want. Parents can set time limits, however.

The service, aimed at kids aged 3 to 8, will cost $ 4.99 per month for one child. It’ll cost $ 2.99 per child for members of Amazon Prime, the company’s premium shipping service. Amazon Prime costs $ 79 per year for free shipping of merchandise purchased in the company’s online store.

Family plans for up to six kids will cost $ 9.99 per month and $ 6.99 for Prime members.

The Kindle already allows for parental controls through its FreeTime service. Parents can set up profiles for up to six children and add time limits to control how long kids can spend reading, watching videos or using the Kindle altogether. With the content subscription service, kids can browse age-appropriate videos, games and books and pick what they want to see. They won’t be shown ads and will be prevented from accessing the Web or social media. Kids also won’t be able to make payments within applications.

Amazon is launching the service as competition heats up in the tablet market among Apple, Barnes & Noble, Microsoft and Samsung. Amazon’s strategy is to offer the Kindle at a relatively low price and make money selling the content.

Offering a subscription service aimed at kids helps set the Kindle apart from its many competitors.

“We hope that our devices are really, really attractive for families,” said Peter Larsen, vice president of Amazon’s Kindle business.

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Countries With the Greatest Use of High-Fructose Corn Syrup Also Have More Diabetes

The soaring rates of diabetes in the United States and many other developed countries over the past three decades has been generally blamed on obesity. We’re getting fatter, and that puts us at risk for developing diabetes. But a new theory suggests that the diabetes epidemic is not just a matter of eating too much and moving too little. It could have more to with some components  of our diet.

High-fructose corn syrup, that staple of many soft drinks and packaged snack foods, is associated with a higher prevalence of diabetes regardless of obesity, according to a new study. The paper raises the question of whether our bodies respond to a steady diet of high-fructose corn syrup by becoming resistant to insulin and developing the inability to process sugar—which results in diabetes.

The paper strikes at the heart of an ongoing controversy in the nutrition world about whether high-fructose corn syrup is just another sugar, like it’s cousin sucrose, or acts differently in the body. That debate is far from settled.

MORE: FDA Says No to Corn Sugar

“It’s controversial,” Dr. Michael I. Goran, professor of preventive medicine at the University of Southern California and a co-author of the paper, told TakePart. “There are strong feelings on both sides.”

Goran’s paper, co-authored with researchers from the University of Oxford, found that countries that use high-fructose corn syrup in their food supply had a 20 percent higher prevalence of diabetes than countries that did not use the substance. Even when researchers controlled for obesity rates and total sugar intake, the presence of high-fructose corn syrup in the diet significantly boosted diabetes rates. The paper appears in the journal Global Public Health.

“Fructose may contribute to obesity and obesity contributes to diabetes. We are not denying that,” says Goran, director of the Childhood Obesity Research Center and codirector of the Diabetes and Obesity Research Institute at the Keck School of Medicine at USC. “But not all obese people are diabetic. On top of that, there is an independent affect of fructose on diabetes over and above what you get from obesity.”

The authors examined data from 42 countries. The United States has the highest per capita consumption of high-fructose corn syrup at 55 pounds per year. The second highest is Hungary, with an annual rate of 46 pounds, per capita. Canada, Slovakia, Bulgaria, Belgium, Argentina, Korea, Japan and Mexico are also heavy users of the substance.

MORE: High-Fructose Diet Makes You Stupid

Countries that have lower consumption rates include Germany, Poland, Greece, Portugal, Egypt, Finland and Serbia. And countries that average only about one pound per person annually include Australia, China, Denmark, France, India, Ireland, Italy, Sweden, the United Kingdom, and Uruguay.

The study found that countries with higher use of high-fructose corn syrup had an average prevalence of type 2 diabetes of 8 percent compared to 6.7 percent in countries not using the sugar.

About 6.4 percent of the world’s population is diabetic, a rate that is expected to rise to 7.7 percent by 2030, according to the paper. In the United States, 8.3 percent of adults are diabetic.

“What was different about our study is we took a much broader, macro look at the issue,” Goran says. “We did that because there is no other good way to look at it. It’s really impossible to know how much is consumed by an individual because it’s so ubiquitous in the food supply and in unknown amounts.”

MORE: Government Subsidizes Junk Food More Than Produce

The study has limitations, he notes. The research only looks at high-fructose corn syrup produced in that country and does not take into account imports.

High-fructose corn syrup is a manmade sweetener that is a popular ingredient in processed foods like ketchup, crackers, cookies and salad dressings. It’s found in many types of soft drinks. According to the U.S. Department of Agriculture, domestic production of the substance increased from 2.2 million tons in 1980 to an average of 9.2 million tons during the 2000s “as high fructose corn syrup replaced more expensively priced sugar in a variety of uses.”

Diabetes rates in the United States began to climb at about the same time that high-fructose corn syrup began playing a bigger role in the food supply. But how high-fructose corn syrup might contribute to diabetes is unknown. Some nutritionists contend that the substance is chemically similar to table sugar and is metabolized similarly in the body. But others say that high-fructose corn syrup causes a different biological reaction than does exposure to sugar. Fructose is also sweeter, which may lead consumers to crave it more or consume more of a food item containing fructose.

“Even in the scientific community, I hear people say all the time that there is no difference” between fructose and sucrose, Goran says. “They are clearly not identical. The next question is how they are different? One of the main things that make them different is in their most popular form, high-fructose corn syrup has more fructose in it, at least 10 percent more. The higher fructose makes it sweeter, so people will probably consume more of it. It’s cheaper to make and you need to add less.”

MORE: Sugar Shock: 9 Drinks Worse Than a Candy Bar

The food industry is sensitive to the idea that fructose is somehow worse than sugar. In a statement, the Corn Refiners Assn., said the study “uses a severely flawed statistical methodology and ignores well established medical facts to ‘suggest’ a unique link between high fructose corn syrup (HFCS) and type 2 diabetes…Most importantly, Dr. Goran’s newest attack on HFCS fails to account for widespread agreement among scientists and medical doctors that HFCS and sucrose (table sugar) are nutritionally equivalent.” 

High-fructose corn syrup is eyed suspiciously be some consumers, however. In May, the Food and Drug Administration turned down a request by the Corn Refiners Assn. to allow them to use the term “corn sugar” on labels instead of high-fructose corn syrup.

Goran is in favor of stricter labeling regulations regarding high-fructose corn syrup. The type of sugar in a product should be clearly labeled in the same way that various types of fats are specified on food labels, he argues.

“Trans fat labeling is a good analogy,” he says. “The public totally buys into the trans fat thing. Trans fats are bad and omega 3 fats are good. You don’t need to understand the chemistry of that. It’s just good fat and bad fat. I think the label should indicate the amount of fructose and let the consumer decide.”

Question: Is high-fructose corn syrup worse than regular table sugar? Tell us what you think in the comments?

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Shari Roan is an award-winning health writer based in Southern California. She is the author of three books on health and science subjects.

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The U.S.-China Cold War Over Accounting

U.S. regulators are cracking down on Chinese companies for issuing misleading financial reports. But the feds have been stymied so far by a wall of resistance to U.S. accounting rules—and not just from the companies.

The Securities Exchange Commission on Dec. 3 formally accused the Chinese affiliates of the Big Four accounting firms of violating U.S. law. The issue at hand: failure to provide documents in ongoing accounting fraud investigations of nine U.S.-listed, China-based companies.

Ernst & Young Hua Ming, Deloitte Touche Tohmatsu Certified Public Accountants, KPMG Huazhen, and PricewaterhouseCoopers Zhong Tian CPAs have been charged “with violating the Securities Exchange Act and the Sarbanes-Oxley Act, which requires foreign public accounting firms to provide the SEC upon request with audit work papers involving any company trading on U.S. markets,” said a statement on the SEC website. The SEC also named a fifth U.S. firm, BDO China Dahua.

“Only with access to work papers of foreign public accounting firms can the SEC test the quality of the underlying audits and protect investors from the dangers of accounting fraud,” SEC Enforcement Director Robert Khuzami said in a prepared statement. “Firms that conduct audits knowing they cannot comply with laws requiring access to these work papers face serious sanctions.”

Over the past two years, the SEC has audited scores of Chinese firms amid concerns that many are issuing financial statements that don’t reflect their real operations. The alleged violations include overstating revenue and profit. Many of them have listed on U.S. exchanges through so-called reverse mergers—when a company buys a largely inactive shell company that already has a listing and so can avoid strict disclosure requirements. To date, the SEC has deregistered almost 50 companies, including China MediaExpress Holdings, and launched fraud investigations against more than 40 issuers and company executives.

The investigations, however, have faced serious obstacles to gathering evidence within China. Beijing’s attitude has been that its own accounting system is fully adequate and that there is no need for the U.S. to conduct its own probe. And China’s security regulators and finance officials have been loathe to participate in any joint investigation.

The international accounting firms, for their part, say compliance with SEC demands would mean breaking Chinese law. “The fact that the action is being taken collectively against all of the four largest audit firms and one other firm demonstrates that this is a profession-wide issue,” Caroline Nolan, a PricewaterhouseCoopers spokeswoman, said in an e-mail statement. “For its part, PwC China has cooperated with the SEC at every opportunity. However, PwC China will, and must, comply with its legal obligations under China law.”

“Ernst & Young Hua Ming supports close working relationships between regulators to enable them to cooperate and share information with one another,” Will White, director of global and EMEIA media relations for Ernst & Young, said in an e-mail statement. “We hope that an agreement can be reached between U.S. and Chinese regulators that will enable our compliance with all applicable laws and regulations.”

The issue is also tied up with China’s historic resistance to perceived foreign meddling in its internal affairs, says Paul Gillis, a professor at Peking University’s Guanghua School of Management and an expert on China’s accounting standards. National security has also been raised as a possible concern by Beijing. This makes any resolution even less likely, and the impasse could eventually lead to the delisting of all Chinese companies in the U.S., predicts Gillis.

“The U.S. is looking at this in terms of its own laws and regulations,” says Gillis, who maintains a blog on China accounting. “China is approaching this issue more ideologically, from a national sovereignty issue. This involves Chinese views of foreign oppression going all the way back to the Opium Wars and Japanese occupation. The idea of foreigners pushing around Chinese is deeply offensive.”

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WestJet embraces tech to woo business travelers

TORONTO (Reuters) – WestJet Airlines Ltd will use technological innovation, including a new Internet ticket booking system, to help it transform from a no-frills carrier to a lower-cost full-service airline courting lucrative corporate travelers, its chief executive said on Monday.

Canada’s second-biggest airline plans to launch a series of technology systems, most notably the new online booking engine, which will sell three tiers of tickets, in the next two months.

“Companies evolve or they die,” Chief Executive Gregg Saretsky told Reuters in a phone interview from the company’s Calgary head office.

“We’re 16 and going on 17 years old and we can’t stay just as we were 17 years ago. The world has changed. And we are changing to be more relevant for a broader segment of guests.”

The new Internet booking system, which WestJet hopes to launch in late January, will sell economy, mid-tier and premium tickets. That is a major shift from its current system, which sells only the lowest-priced ticket available.

Economy tickets under the new system will continue to sell the lowest available fare, but the cancellation fee for them will jump to C$ 75 ($ 75.48) from C$ 50. Mid-tier tickets will have a C$ 50 cancellation fee.

Premium tickets, unavailable until late March when WestJet finishes reconfiguring its 100 Boeing 737 planes to allow more leg room, will include priority screening and boarding, free cancellations and flexibility on ticket changes.

Pricing for those tickets, which may include free meals and drinks and an extra baggage allowance, has not yet been determined. Fares will be well below half the price for business class at WestJet’s bigger competitor, Air Canada, Saretsky said.

“It’s time for us to be more serious with respect to going after business travelers because frankly, they’re the ones who are booking last-minute and are happy to pay for the conveniences,” Saretsky said.

WestJet will launch its premium economy service with 24 seats per plane, but will consider expansion if it proves “wildly successful,” he added.

POISED FOR CHANGE

WestJet, which has spent about C$ 40 million over the past two years on technology projects, is poised for major changes in 2013 as it readies to launch a new regional airline, Encore.

Saretsky hopes that WestJet’s switch in coming weeks to a new Internet phone system will allow ticket reservation agents to work from home and help make room for Encore staff.

Some 750 reservation agents work at WestJet’s Calgary offices, which house about 2,400 staff. Space will be needed for Encore employees over the next 18 months while their office, hangars and maintenance stores are constructed at the WestJet campus.

Encore will be launch in the second half of 2013, “probably closer to July than December,” Saretsky said, with seven Bombardier Q400 planes.

While WestJet won’t announce Encore’s schedule until Jan 21, the carrier will initially serve only “a handful” of new cities, with ticket prices up to 50 percent below Air Canada’s, he added.

Over the next two months, WestJet will also roll out a guest notification system that alerts travelers via email about their flights, allowing them to check in remotely.

Such self-service technology will be critical as WestJet faces increasing labor costs, Saretsky said.

Wage and benefit costs, which represent about a third of operating costs, have climbed 50 percent since WestJet was founded in 1996.

“You can see that creates a little bit of drag on earnings,” Saretsky said. “We’ve got to find ways of reducing our component costs.”

If WestJet can increase self service options for travelers, that could limit the need for new employees, Saretsky said. Management also wants to improve attendance management, so that fewer employees book off sick around long weekends, and more quickly clean and process planes between flights, he said.

(Reporting By Susan Taylor; Editing by Peter Galloway)

(This story was corrected to show that WestJet is replacing its Internet booking engine, not entire reservation system, in the first and second paragraphs)

Canada News Headlines – Yahoo! News

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Judge gives initial OK to revised Facebook privacy settlement

(Reuters) – A U.S. judge on Monday gave his preliminary approval to a second attempt by Facebook Inc to settle a class action lawsuit which charges the social networking company with violating privacy rights.

U.S. District Judge Richard Seeborg in California rejected a settlement in August over Facebook‘s ‘Sponsored Stories’ advertising feature, questioning why it did not award money to Facebook members for using their personal information.

But in a ruling handed down Monday, Seeborg said a revised settlement “falls within the range of possible approval as fair, reasonable and adequate.”

In a revised proposal, Facebook and plaintiff lawyers said users now could claim a cash payment of up to $ 10 each to be paid from a $ 20 million total settlement fund. Any money remaining would then go to charity.

The company also said it would engineer a new tool to enable users to view content that might have been displayed in Sponsored Stories and opt out if they desire, a court document said.

If it receives final approval, the proposed settlement would resolve a 2011 lawsuit originally filed by five Facebook Inc members.

The lawsuit alleged the Sponsored Stories feature violated California law by publicizing users’ “likes” of certain advertisers without paying them or giving them a way to opt out. The case involved over 100 million potential class members.

A spokesman for Facebook said the company was “pleased that the court has granted preliminary approval of the proposed settlement.” Lawyers for the plaintiffs weren’t immediately available for comment Monday evening.

Outside groups and class members will have a chance to object to the latest settlement before Seeborg decides whether to grant final approval. A hearing on the fairness of the deal has been set for June 28, 2013. The case in U.S. District Court, Northern District of California is Angel Fraley et al., individually and on behalf of all others similarly situated vs. Facebook Inc, 11-cv-1726.

(Reporting by Jessica Dye; Editing by Michael Perry)

Tech News Headlines – Yahoo! News

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RPT-NFL-Kansas City Chiefs murder/suicide key may never be found

(Repeats to change word in headline)

* Player’s death adds to recent NFL suicides

* Player head injuries seen as ongoing problem

* Experts wonder if drugs such as steroids involved

Dec 3 (Reuters) – The murder/suicide committed on Saturday by Kansas City Chiefs football player Jovan Belcher left the National Football League, its fans and health professionals struggling to understand what drove him to do it.

Belcher, 25, shot and killed his 22-year-old girlfriend Kasandra Perkins, the mother of his three-month-old daughter, in front of his own mother at home before driving to Arrowhead Stadium where he shot himself dead in the parking lot after thanking team officials for all they had done for him.

For the NFL, arguably the most popular U.S. professional sport, the tragic shootings cast the league in a frightfully brutal light as Belcher became the fourth player this year to die of a self-inflicted gunshot.

Former players Junior Seau in May, Ray Easterling in April and Michael Current in January all committed suicide.

A fifth suicide victim, former Chicago Bears player Dave Duerson killed himself by gunshot less than two years ago, leaving a note requesting that his brain be examined for a post-concussive disease that might have led to his severe depression.

An brain analysis showed that Duerson had a degenerative brain disease, as he had believed.

Details on Belcher’s health have been slow to emerge.

Dr. Alan Hilfer, Director of Psychology at Maimonides Medical Center in New York, said just why Belcher suddenly snapped could remain a mystery.

“We may never know the reasons,” Hilfer told Reuters in a telephone interview on Monday. “Something was terribly wrong.”

The league has come under fire from former players who have joined to sue the NFL, claiming league officials looked the other way while the players were absorbing concussions that have led to long-term disabilities.

LOOKING FOR AN EDGE

Others suspect that the high-speed, muscular contact game leads players to look for a doping edge despite drug testing, and that can lead to psychological instability.

Chiefs Chairman Clark Hunt said Sunday that doctors and coaches told him they knew of no physical or emotional issues bothering Belcher, who reached the NFL as a free agent after going to the University of Maine.

“What do you look for? It’s a very hard question to answer,” Hilfer said. “Certainly you look for mood changes. Certainly you look for increased levels of impulsively and anger.

“These things sometimes occur so suddenly. Sometimes there is just no way you could possibly know that someone is going to perpetrate an act of violence of this magnitude.”

Don Hooton, who founded the Taylor Hooton Foundation to promote steroids education in 2004, seven months after his son, Taylor, committed suicide following his use of anabolic steroids, suspects doping.

“Every time I hear a story like this, my mind runs immediately to anabolic steroids,” Hooton said. “Not necessarily to the exclusion of anything else, but because anabolic steroids can affect the mind in these crazy ways.

“I hope when they do the autopsy on this young man, that they look for these substances because it’s possible that what we saw was ‘Roid Rage’” – a label given to the exhibition of anger among steroid users.

Hooton said that despite efforts in professional leagues to stem the use of performance-enhancing drugs (PED), recent studies showed that steroids use was on the rise among U.S. school children.

“It’s not getting better – it’s getting worse,” said Hooton. “We better wake up, America.”

LARGER SOCIETAL PROBLEMS

Dan Lebowitz, executive director of Sport in Society at Northeastern University, said he saw the Belcher tragedy as something that speaks to societal problems transcending sports.

“This is an issue of men’s violence against women, not just football players being too violent,” Lebowitz said.

“When I look at it, I try to take it out of the realm of sport. I just think about the way we acculturate young boys in this country and our whole view of manhood.”

Lebowitz’s group has worked for the NFL on a 2010 training program aimed at gender equality and respect in the workplace, and ran a training project at the soccer World Cup in South Africa on preventing gender violence.

“If you look at how many NFL players commit gender violence in proportion to the overall population, the percentage falls in line with the general population, three to five percent.

“From what I hear she came home from a concert late and he reacted horrifically. We don’t have a healthy concept of what manhood is and how certain things that we see as an affront to manhood probably aren’t that at all.”

Lebowitz said the awful incident could spawn an opportunity to educate others.

“Nothing happens in a bubble. This is the fifth NFL player to commit suicide by a self-inflicted gunshot … this one was (preceded) by a murder. Right now there is an absolute heightened spotlight on all the issues around sports in general.

“How do we make a healthier sport, and how do we make a healthier man? How do we engage in a real conversation about respect for women’s rights and freedoms?”

Dr. Hilfer said athletes were often reluctant to seek help.

“They can benefit from additional help, especially considering the rash of suicides from concussive syndromes,” he said. “I would have loved to get this guy into some form of counseling therapy.

“It would have been wonderful if they could ask for help but athletes are often reluctant because their image is that of a tough guy who can handle things. They are as a rule some of the people who are least likely to access mental health services.”

Mike Paul, who runs a New York public relations business specializing in reputation management, said the incident would challenge NFL Commissioner Roger Goodell.

“This is a big one for him,” Paul told Reuters. “The helmet (safety) issue and the steroids and PED issue, continue. Now it is right back in his face again and he has two choices.

“He can confront it head on and say it is time for further examination as we go into 2013 … or he can try to slide it under the rug by saying it’s a one-off.

“I think it would be a big mistake to say it was a one-off.” (Editing by Philip Barbara)

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