Tuesday, June 18, 2013
EXCLUSIVE: Hidden camera catches wireless company employees passing out 'Obama phones' to people who say they'll SELL them for drugs, shoes, handbags and spending cash
- The 'Lifeline' free-cell-phone scheme cost $2.2 BILLION last year alone, all of it from fees added to the phone bills of paying customers
- The biggest beneficiary other than low-income consumers is billionaire Carlos Slim Helu, whose TracFone has collected $1.5 BILLION to date
- One company told MailOnline it will fire a salesperson who laughed uproariously when a woman said she would sell her phone to buy shoes
- Conservative firebrand James O'Keefe sent undercover actors to pose as 'Obama phone' seekers aiming to sell the goods; no one turned them down
- Legislation in Congress would remove the cell phone component of the program, which launched in 1984 and covered only land lines until 2008
A typical government program mostly waste, fraud, intentional incompetence and vote buying.
The lower house of Switzerland's parliament has refused to debate a bill that would allow Swiss banks to pass client information to the US tax authorities.
The bill is the result of pressure from the US following revelations that Swiss banks had helped American account holders to evade taxes.
The US had demanded action by 1 July, but the Swiss parliament summer session ends this week.
The bill will now return to the Senate.
The lower house decided by 126 votes to 67 not to discuss the bill. A second rejection by the lower house would effectively kill the draft law.
The bill would allow Swiss banks to sidestep strict secrecy laws and release information relating to clients' accounts.
It also contained secret clauses requiring the banks to pay an estimated $10bn (£6.4bn) in compensation for lost tax revenue.
Swiss politicians are in no mood to change their laws because Washington tells them to, reports the BBC's Imogen Foulkes from Berne.
The Senate very reluctantly approved the bill last week, after it became clear the US would indict Swiss banks, and possibly even cut them off from the dollar market if it did not go through.
A long tradition of banking secrecy is becoming a political crisis for Switzerland, adds our correspondent. Switzerland has also come under pressure from the EU over the issue.
In January Switzerland's oldest private bank, Wegelin, closed after being indicted and fined $58m by the US authorities after admitting in court to helping American customers to hide more than $1.2bn from the Internal Revenue Service.
In 2009, Swiss bank UBS paid $780 million and handed over details of more than 4,000 accounts in order to avoid indictment.
Piracy off the coast of West Africa has now overtaken Somali piracy, a report by the International Maritime Bureau (IMB) and other seafarers' groups says.
It says 966 sailors were attacked in West Africa in 2012, compared with 851 off the Somali coast.
West African pirates mostly steal fuel cargo and the crews' possessions, often resorting to extreme violence.
Five of the 206 hostages seized last year off West Africa have been killed, the document says.'Sadistic methods'
The report, entitled The Human Cost of Maritime Piracy 2012, was released by the International Maritime Bureau (IMB), the Oceans Beyond Piracy (OBP) project and the Maritime Piracy Humanitarian Response Programme (MPHRP).
It says that despite the growing number of pirate attacks in West Africa's Gulf of Guinea region "the area has not received the attention that was brought to Somalia".
Pirates typically target fuel cargo, selling it on the lucrative black market.
"In Nigeria, money moves quite quickly, unlike in Somalia," one seafarer is quoted as saying in the document.
"In Somalia, it would take months. In Nigeria, the pirates take our (oil) cargo and the money of the (shipping) company. It would take only weeks, it is quite fast."
The highest risk area for pirate activity in West Africa is off the coast of Nigeria, by far the biggest country, and oil producer, in the region.
Because successive governments there have failed to develop sufficient domestic oil refining capacity, Nigerian waters are full of tankers exporting crude oil and importing refined petroleum that are vulnerable to attack, says BBC international development correspondent Mark Doyle.
Corruption and, until recently, armed rebellion in the oil producing areas, have led to the development of an entire, well-organised industry for stealing - or "bunkering", as it is known in Nigeria - oil products, he says.
That industry has become almost institutionalised by a national government subsidy on petrol, our correspondent adds.
The report released on Tuesday says tackling piracy in both West Africa and Somalia requires "co-operation between efforts at sea and those on land to build maritime security and provide job opportunities to potential pirates".
At the same time, the findings show a 78% drop in piracy off Somalia last year compared with 2011.
The report says this is due to better practices by ship's captains and crews and the increasing use of armed guards aboard vessels in the region.
But it adds that at least 78 hostages are still being held captive by Somali pirates. Some sailors have been already held for more two years.
Many Somali pirates have used cruel and sadistic methods to extort ransom payments, it says.
Monday, June 17, 2013
(Reuters) - Danish designer Henrik Fisker knows how to style a sexy car. Among his works is the BMW Z8, driven by James Bond in "The World Is Not Enough," where the sleek roadster gets sliced in two by a helicopter armed with giant saws.
Fisker's latest piece of rolling sculpture is the comely Fisker Karma hybrid sports sedan — and it may meet an equally ugly end.
The Dane's startup, Fisker Automotive, hasn't built a car in nearly a year. It fired most of its workforce, hired bankruptcy advisers and is seeking a buyer. Co-founder Henrik Fisker resigned in mid-March in a dispute with some of the directors. And despite raising $1.4 billion in private and public funds since its founding in 2007, the company is out of cash. For months, key investors have been footing the car maker's day-to-day expenses to keep it alive in diminished form.
An examination of the company's rise and fall reveals Fisker's finances started to unravel as early as June 2011, when the U.S. Department of Energy cut off access to taxpayer-funded loans — a fact that wasn't publicly acknowledged by Fisker for nine months.
That and other troubling information remained unknown by many of Fisker's private-sector investors, who put $525 million into the company from May 2011 through August 2012, attracted by rosy sales forecasts and assurances the company valued itself at nearly $2 billion.
"One characteristic of businesses that are in trouble like this is, as the desperation increases, they tend to bend the story a little," said David Cole, a longtime auto consultant and former head of the Center for Automotive Research in Ann Arbor, Michigan.
Fisker declined to comment. A Fisker executive who spoke on the condition of anonymity said the company accurately presented its finances to both investors and the government. The executive said Fisker disclosed to investors in a December 2011 letter that it was unlikely to meet the financial covenants under the government loan.
"Whatever the Energy Department's internal assessment or view might have been, we certainly weren't giving them different information or different forecasts than we were providing to our own investors," the executive told Reuters in late May.
Fisker's undoing had numerous causes. Fundamentally, say suppliers and some insiders, executives simply couldn't orchestrate the complex dance that leads from a design sketch to the production and sale of a profitable car. Spending was lavish; engineering blunders rife. The company also faced pressure from both its investors and its chief creditor, the Energy Department, to meet ambitious goals set by Fisker executives.
The findings raise questions about whether the Energy Department provided sufficient oversight and whether Fisker's board of directors, comprised mainly of large investors, afforded proper corporate governance.
A detailed portrait of Fisker Automotive and its finances emerges from interviews with more than 30 people close to the company, as well as a review of five years of confidential investor presentations seen by Reuters, and internal Energy Department emails and briefings released during a congressional hearing in late April.
Most of those interviewed spoke on the condition of anonymity. Henrik Fisker, his partner Barny Koehler and other executives at Fisker declined to comment.
The Energy Department has repeatedly defended its handling of the Fisker loan. Nicholas Whitcombe, who previously led the DOE loan program, told lawmakers in April that the DOE "acted decisively to protect the taxpayers' interest since it became evident that Fisker faced financial difficulties.
Fisker Automotive was founded in August 2007 with the goal of building a beautiful, "green" car that could rival exclusive European brands like Maserati and Aston Martin.
Around the same time, Ray Lane, then a senior partner at venture-capital firm Kleiner Perkins Caufield & Byers, was developing a portfolio centered on clean technology. Lane, a onetime IBM executive, made his reputation as president of software giant Oracle. Kleiner Perkins had bankrolled the likes of Google and Amazon. Their backing was a coup for any startup.
Lane threw his support behind Henrik Fisker in early 2008, joined Fisker's board of directors and ultimately went on to serve as the startup's lead investor, board chairman and chief cheerleader. Two people close to Lane said he was impressed by Henrik Fisker's design chops.
Fisker landed an even bigger backer the next year. In September 2009, Fisker won a $529 million loan from the Energy Department to develop the Karma and build a second model in the United States. The financing came as part of a broader Obama administration effort to shore up employment in the recession-ravaged auto industry and improve the fuel efficiency of the U.S. auto fleet by extending government loans to so-called green-energy initiatives.
A month later, Fisker agreed to buy an idle General Motors factory in Delaware for about $20 million. The government loan approval was a welcome relief for Fisker, which was hurting for cash by late that summer and eager to raise more money from investors, according to an email from Koehler.
"We are oversubscribed in this equity round with the Energy Department support — and nowhere without it," Koehler said in an August 2009 email to Energy Department officials.
The announcement triggered a flood of investor interest in Fisker. The company raised some $600 million before it ever sold a car.
Despite this influx of cash, Fisker never turned a profit. From 2008 to 2012, the carmaker lost an estimated $1 billion, according to internal financial statements and confidential presentations made to prospective investors.
Fisker built an estimated 2,450 Karmas from 2011 to 2012, but lost at least $35,000 on each car, according to internal financial statements and interviews with former Fisker executives. One former executive said the Karma "cost far more to produce than we could ever charge for it."
Repeated delays in the start of Karma production and a drastic curtailment in volume meant that Fisker was paying higher-than-budgeted prices for many components and sub-systems, as well as contractual penalties to suppliers and to Valmet, which built the Karma under contract in Finland. Fisker eventually delivered about 200 cars to customers in 2011 and another 1,600 in 2012; it originally planned to sell 15,000 Karmas a year, starting in late 2009.
Some of the production delays were caused by last-minute design changes and engineering fixes, insiders said, resulting in additional cost overruns and late shipments of critical components. Fisker also over-ordered and stockpiled other parts. There was no sales revenue to help offset some of those costs until late 2011. A person close to the company's finances estimated that last-minute tweaks rendered between $50 million and $100 million of Fisker's parts inventory obsolete.
Another hitch: Pressure on engineers to stay faithful to Henrik Fisker's original design, even when flaws emerged that undercut the Karma's performance and potential fixes would add millions in cost.
In mid-2011, engineers found that Fisker's unusual front-end exhaust design was too noisy and hurt the Karma's horsepower. This could have been headed off years earlier by putting the exhaust pipe in the back, as is standard, but the idea was struck down.
What emerged was a solution dubbed the "pizza box" that kept the exhaust system in front, but encased it in a very thin steel box. The idea emerged after engineers ordered pizza for lunch one afternoon. The solution addressed some concerns about the sound of the vehicle, as well as CEO Fisker's aesthetic sensibility — but at an extra cost of millions of dollars, according to two engineers who worked on the redesign program.
The company also pressured its suppliers to meet ambitious deadlines, but was slow to provide the necessary technical information and, in some cases, timely payment. On more than one occasion, Fisker asked suppliers to hand-build certain components for the Karma, which increased the cost as much as threefold.
"Beneath the world-class skin was a rudimentary machine that needed several years of engineering refinement and testing before it could be ready to be released," said Maurice Gunderson, a managing partner at Runway Capital Partners who had an opportunity to invest in Fisker in early 2010 and passed.
The frayed relations with suppliers didn't help. By late 2011, Fisker had amassed $200 million in unpaid bills, according to the Energy Department. Fisker acknowledged, in a December 2011 letter to shareholders, that it faced $168 million in "claims arising from liabilities to suppliers and other creditors."
Henrik Fisker and co-founder Koehler were pulling down handsome salaries — $600,000-$700,000 a year, according to several sources familiar with Fisker's executive compensation — even after the company began laying off hundreds of employees in late 2011 and early 2012.
Considerable sums were used to burnish the image of the company as well as Henrik himself.
In May 2011, the company co-sponsored a pre-race grand prix party aboard a 146-foot yacht moored in the Monte Carlo harbor. Guests drank glasses of champagne served with flecks of gold. Clad in a dark pinstripe suit and open-neck white shirt, Henrik Fisker navigated a crowd that included Prince Albert of Monaco, whom he described as the inspiration for the Karma. The next day, Fisker took the prince for a ride on the race course in a prototype Karma.
The Monaco weekend, according to several sources familiar with the event, cost Fisker between $80,000 and $100,000. That wasn't lavish by auto-marketing standards, but by this point every penny mattered. Within weeks, the Energy Department stopped payments on its loan.
The 15-month period from the time the Energy Department held up the loan in June 2011 was critical. As the first Karmas began to arrive at U.S. dealers in late 2011, investors and government representatives weren't always hearing the same story.
Fisker faced a series of cash crises, telling the Energy Department it was nearly broke in October and December of 2011 and August 2012. Investors in late 2011 heard a different spin — that Fisker pegged its value at nearly $2 billion and envisioned annual sales of more than $12 billion within five years.
In the run-up to the Karma's launch, the company battled constantly with the Energy Department to renegotiate the terms of its loan agreement, as it regularly missed deadlines, constantly revised downward its projections for production and sales, and suffered from chronic cash shortfalls.
The Energy Department, in a December 2011 internal briefing, said it "halted further funding of the loan" in June 2011 after it received "varied and incomplete explanations" from Fisker about persistent delays in producing and selling the Karma. In a separate internal briefing in December 2011, the Energy Department said it had stopped disbursing loan funds to Fisker after the company had "missed production milestones" while experiencing "performance and execution problems."
Neither the Energy Department nor Fisker made that news public until February 2012, when Fisker told reporters that it was "renegotiating" terms of the loan. The department that same month said that it "only allows the loan to be disbursed as the company meets certain milestones and demonstrates results."
Before then, Fisker told the government on November 1, 2011, that it would run out of cash within three days without additional government loan money or an injection of private equity; on November 30, it said a modest investment increase of $37 million at mid-month had nudged its cash pile to a still-thin $20 million.
Just weeks later, in a December 14 letter to shareholders, Fisker told investors that the company had a capitalization "approaching $2 billion." That included $720 million in private equity, almost all of which had been spent.
The total also included the full $529 million in loans approved by the Energy Department — even though Fisker was able to tap only $192 million before being cut off six months earlier — and an inflated value of up to $700 million for the still-idle Delaware plant, more than 30 times the purchase price. The Energy Department described the plant, in a December 2011 memo, as "just a shell."
In an internal Energy Department briefing dated December 19, 2011, officials discussed a plan to monitor Fisker's progress in getting the Delaware plant ready to build cars "by the end of 2013." In a separate email exchange in late December 2011, Energy Department officials and consultants forecast that Fisker's second model, the Atlantic, would not be ready for production in Delaware until mid-2014.
In the December 14, 2011, shareholder letter, CEO Henrik Fisker assured investors that the company "will maintain the 2013 launch timing" for the Atlantic. Seven weeks later, on February 7, 2012, the company shut down work at the Delaware plant and laid off all 26 workers there.
As for the critical government loan, Fisker did not tell investors in the December letter that it hadn't been able to tap the Energy Department funds for six months. The company said the remaining $336 million of the loan "remained available" to help fund the Atlantic and that it had "elected" not to request any further draws while it renegotiated terms with the government.
It admitted missing "certain financial covenants and project milestones," but said the Energy Department had agreed to delay the effective dates of the covenants for one year.
The Fisker executive told Reuters that the government didn't notify the company in 2011 it was going to cut off access to the loan, but rather the company had stopped seeking the funds: "They weren't funding during that time because we weren't submitting advance requests."
Privately, the company was trying to renegotiate the loan terms, telling Energy Department overseers in fall 2011 that it needed to raise additional private equity. The Energy Department, in internal briefings, noted that it had granted Fisker a one-year waiver in early December 2011 on meeting certain unspecified milestones and covenants - but it had not restored access to the loan funds.
Fisker told the Energy Department in early 2012 that its dire financial circumstances might force a sale of the company or a move to China or Russia. Fisker also considered a high-yield debt offering of up to $400 million in mid-2012 and an initial public offering in mid-2013. Neither one materialized.
By August 2012, Fisker's cash was down to $12 million, and the Energy Department recommended to Fisker that it consider an "emergency sale," according to an internal Energy Department briefing dated August 2, 2012.
Fisker made no mention of the Energy Department's recommendation or the company's precarious cash position in an August 22, 2012 investor presentation aimed at raising $150 million in equity by September and another $275 million in mid-2013.
In that August presentation, Fisker noted that the DOE loan remained "an attractive, low-cost source of funding" for the company, but observed that "no future advances are expected."
CASH DRAINED AGAIN
By spring 2013, with Fisker's cash drained yet again, Energy officials were pushing for a bankruptcy restructuring, a move that continues to be opposed by several of the company's largest investors.
To be sure, Fisker still has its backers. Lane, now partner emeritus at Kleiner Perkins Caufield & Byers and a Fisker director until late May, has personally provided funding to the company, a person familiar with the matter said. Neither Lane nor Kleiner Perkins would comment.
Lane's willingness to invest personally in the company is an unusual step in venture capital. It also comes at a time when Lane has been beset by other issues, including settlement of a long-running, multimillion-dollar tax dispute with the Internal Revenue Service and resigning the chairmanship of Hewlett-Packard in April under investor pressure for his role in the acquisition of Autonomy Plc.
Some Fisker investors also are emboldened by the success of green-car rival Tesla Motors Co, whose stock has more than tripled this year and whose market capitalization briefly topped $12 billion in late May.
For some smaller investors, however, it's too late to recoup their losses.
"My money is gone forever," one investor said. "Somebody will have to explain to me why that happened. I still have questions."
Even smart investors get taken in by fantasy and wishful thinking.
Continue reading the main story
The women's university at the centre of Saturday's deadly twin attacks in the Pakistani city of Quetta has been shut down until further notice.
In the first incident a bomb on a university bus killed 14 women. Gunmen then killed 11 when they laid siege to the hospital treating the wounded.
Sardar Bahadur Khan University is the only all-female university in troubled Balochistan province.
The move is seen as a safety precaution in a city which has seen many attacks.
The site of the five-hour gun battle that unfolded after the bus bombing, the sprawling Bolan Medical Complex in Quetta, has also been closed indefinitely.
Continue reading the main story
- Founded in the 1980s, Lashkar-e-Jhangvi is a Sunni Muslim militant group blamed for a string of sectarian and high-profile terror attacks
- Banned in Pakistan in 2001 and designated a terrorist group by the US in 2003
- The group has ties to other militant networks such as the Pakistani Taliban
- It regularly attacks Shia targets, but has also been linked to major attacks such as the 2007 assassination of former PM Benazir Bhutto
An extremist Sunni group, Lashkar-e-Jhangvi, has said it carried out both attacks. A spokesperson for the group said a female suicide bomber had been used to target the university students.
Although police now say they have found the severed head of a woman from the scene, they say the investigation is continuing to see if this really was a suicide attack.
Correspondents say that the use of women as suicide bombers in Pakistan has been rare.
On Sunday, Quetta observed an official day of mourning but Monday saw yet more groups, such as the Balochistan Bar Association, declare a strike to mourn the attacks.
Saturday's bloodshed began when a bomb exploded on a bus carrying students at Sardar Bahadur Khan Women's University.
When survivors were brought to the medical centre, militants stormed the building and started shooting indiscriminately.
The battle between the militants and security forces left nurses, security personnel and a senior city official among the dead.
Four attackers were also killed and one arrested, officials say.
Quetta, a city of 900,000 people in the south-west of the country, has long been troubled by violence mainly targeting the Shia Muslim minority, often claimed by groups such as Laskar-e-Jhangvi.
In January at least 81 people, mainly Shia Muslims, were killed in a bomb attack on a snooker hall in the city. And in February almost 90 died when a bomb ripped through a marketplace in a Hazara Shia part of the city.