LOS ALTOS, Calif. — No need for tears, but the well-off are losing their master suites and saying goodbye to their wine cellars.
The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves like this one in Silicon Valley.
Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.
More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.
By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.
Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.
“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.
Five properties here in Los Altos were scheduled for foreclosure auctions in a recent issue of The Los Altos Town Crier, the weekly newspaper where local legal notices are posted. Four have unpaid mortgage debt of more than $1 million, with the highest amount $2.8 million.
Not so long ago, said Chris Redden, the paper’s advertising services director, “it was a surprise if we had one foreclosure a month.”
The sheriff in Cook County, Ill., is increasingly in demand to evict foreclosed owners in the upscale suburbs to the north and west of Chicago — like Wilmette, La Grange and Glencoe. The occupants are always gone by the time a deputy gets there, a spokesman said, but just barely.
In Las Vegas, Ken Lowman, a longtime agent for luxury properties, said four of the 11 sales he brokered in June were distressed properties.
“I’ve never seen the wealthy hit like this before,” Mr. Lowman said. “They made their plans based on the best of all possible scenarios — that their incomes would continue to grow, that real estate would never drop. Not many had a plan B.”
The defaulting owners, he said, often remain as long as they can. “They’re in denial,” he said.
Here in Los Altos, where the median home price of $1.5 million makes it one of the most exclusive towns in the country, several houses scheduled for auction were still occupied this week. The people who answered the door were reluctant to explain their circumstances in any detail.
At one house, where the lender was owed $1.3 million, there was a couch out front wrapped in plastic. A woman said she and her husband had lost their jobs and were moving in with relatives. At another house, the family said they were renters. A third family, whose mortgage is $1.6 million, said they would be moving this weekend.
At a vacant house with a pool, where the lender was seeking $1.27 million, a raft and a water gun lay abandoned on the entryway floor.
Lenders are fearful that many of the 11 million or so homeowners who owe more than their house is worth will walk away from them, especially if the real estate market begins to weaken again. The so-called strategic defaults have become a matter of intense debate in recent months.
Fannie Mae and Freddie Mac, the two quasi-governmental mortgage finance companies that own most of the mortgages in America with a value of less than $500,000, are alternately pleading with distressed homeowners not to be bad citizens and brandishing a stick at them.
In a recent column on Freddie Mac’s Web site, the company’s executive vice president, Don Bisenius, acknowledged that walking away “might well be a good decision for certain borrowers” but argues that those who do it are trashing their communities.
Thursday, July 8, 2010
Reliance Industries Borrows $1 Billion for Five, Seven Years From Banks
Reliance Industries Ltd., owner of the world’s largest refinery, raised $1 billion in loans from banks, two people involved in the transaction said.
India’s biggest company by market value borrowed $500 million for five years agreeing to pay 170 basis points over the London interbank offered rate, the people said, declining to be identified before a public announcement. Reliance borrowed the balance for seven years and will pay 190 basis points over Libor, the people said.
Bank of America Merrill Lynch, Sumitomo Mitsui Financial Group, Inc. and Credit Agricole CIB helped the Mumbai-based company raise the funds, one of the people said.
Reliance spokesman Manoj Warrier declined to comment.
India’s biggest company by market value borrowed $500 million for five years agreeing to pay 170 basis points over the London interbank offered rate, the people said, declining to be identified before a public announcement. Reliance borrowed the balance for seven years and will pay 190 basis points over Libor, the people said.
Bank of America Merrill Lynch, Sumitomo Mitsui Financial Group, Inc. and Credit Agricole CIB helped the Mumbai-based company raise the funds, one of the people said.
Reliance spokesman Manoj Warrier declined to comment.
Wednesday, July 7, 2010
Retailer Bonds Pull Away as Time Warner Sells: Credit Markets
July 8 (Bloomberg) -- Retailers, buoyed by sales growing at the fastest pace in four years, are outperforming the U.S. corporate bond market as investors wager the economy will avoid a double-dip recession.
The bonds have returned 2.8 percent since the end of May as the market gained 1.9 percent, according to Bank of America Merrill Lynch index data. Greensboro, North Carolina-based apparel maker VF Corp., the index’s best performer in June, returned 5 percent for the month.
Retail sales probably expanded at an average monthly rate of 4 percent in the five months through the end of June, the biggest gain since 2006, the International Council of Shopping Centers said before a report due today. Discount retailers such as Wal-Mart Stores Inc. are attractive to investors because consumers are likely to switch to cheaper products if the economy slows, said Payden & Rygel’s Greg Tornga.
“People were out and about, spending money,” said Tornga, head of investment-grade strategy at the Los Angeles-based firm, which has more than $50 billion in assets under management. “They weren’t necessarily spending a lot of money, but it was an improvement over last year.”
Retailer debt returns exceeded the average for U.S. corporate bonds in each of the past three months, Bank of America Merrill Lynch index data show. Retailers returned 3.25 percent in June, compared with 1.89 percent for the market. Bonds from Bentonville, Arkansas-based Wal-Mart, the world’s biggest retailer, returned 3.61 percent last month. Target Corp. of Minneapolis, the second-biggest U.S. discount retailer, gained 4.2 percent.
Time Warner Offering
Elsewhere in credit markets, the extra yield investors demand to own corporate bonds instead of government debt was unchanged at 196 basis points, or 1.96 percentage point, Bank of America Merrill Lynch’s Global Broad Market Corporate index shows. Yields averaged 3.957 percent.
Time Warner Inc., the New York-based owner of the Warner Bros. movie studio and the HBO cable channel, raised $3 billion in a three-part bond offering, its biggest since November 2006.
The company’s $1 billion of 6.1 percent, 30-year bonds yield 215 basis points more than similar maturity Treasuries, compared with the spread of 162 basis points it paid on $600 million of 6.2 percent 2040 bonds issued in March, according to data compiled by Bloomberg.
Bondholder Protection
The cost of protecting corporate debt from default in the U.S. fell for the fourth straight day.
Credit-default swaps on the Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, fell 5.7 basis points to a mid-price of 116 basis points, according to Markit Group Ltd.
In London, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings dropped 1.18 to 123, Markit prices show. The Markit iTraxx Asia index of swaps on 50 investment- grade borrowers outside Japan dropped 9.5 to 130.5 as of 8:20 a.m. in Hong Kong, according to Credit Agricole CIB.
The indexes typically fall as investor confidence improves and rise as it deteriorates. Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
Bank of America Merrill Lynch cut its forecast for U.S. investment-grade debt sales in 2010 to $700 billion from $800 billion, citing growth in company cash balances.
“Many issuers in high grade have flexibility to stay on the sidelines because balance sheets have become increasingly liquid over the past couple of years both for banks and industrials,” Bank of America analysts Hans Mikkelsen and Yuriy Shchuchinov wrote in a report.
Morgan Stanley
Morgan Stanley, owner of the world’s largest brokerage, was the most actively traded U.S. corporate bond yesterday by primary dealers followed by General Electric Co., Bloomberg data show. The most actively traded junk bond was Anadarko Petroleum Corp. High-yield, high-risk debt is rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.
Fannie Mae plans to sell three-year benchmark notes today, the Washington-based mortgage-finance company with U.S. government support said in a statement.
Citigroup Inc., Deutsche Bank AG and UBS AG are managing the transaction, Fannie Mae said. Investors should buy the 3- year notes and sell existing 2-year agency debt after the spread between the maturities “steepened slightly,” according to Jim Vogel, head of agency-debt research for FTN Financial in Memphis, Tennessee.
Retail Sales
The extra yield investors demand to hold emerging-market bonds rather than government notes declined the most in almost a month. The spread tightened 11 basis points to 323 basis points, the most it has narrowed since June 10, according to JPMorgan Chase & Co.’s Emerging Market Bond index.
Retail sales in June probably came in at the high end of a projected 3 percent to 4 percent range, the ICSC trade group said.
“Consumer spending picked up in the first half, and that by itself is very attractive for bond investors,” Lloyd McAdams, chief investment officer at Santa Monica, California- based Pacific Income Advisers, with $4.5 billion of assets under management.
The extra yield investors demand to own retailers’ bonds widened 2 basis points since the end of May to 118, as the overall market expanded 9 basis points to 315, according to Bank of America Merrill Lynch index data.
S&P has upgraded 10 investment-grade consumer non-cyclical borrowers this year and cut 8 issuers, compared with 2 increases and 12 downgrades in the same period last year, Bloomberg data show.
Wal-Mart, Target
Wal-Mart sold $3 billion of debt in a three-part offering on June 30 in its biggest dollar-denominated bond transaction since July 2001, Bloomberg data show.
Wal-Mart, which operates in 15 countries, has benefited from growth in Mexico, Canada and China, as sales declined at U.S. stores amid the worst recession since the 1930s. The company affirmed an earnings forecast on June 4 for second- quarter U.S. same-store sales ranging from a decline of 2 percent to an increase of 1 percent. Comparable-store sales have fallen for four straight quarters.
Target’s $1 billion of 5.375 percent notes due in 2017 have risen 5.77 cents to 114.16 cents on the dollar this year, the highest on record, according to Trace, the bond-price reporting system of Financial Industry Regulatory Authority.
Bigger Grocery Sections
Expanding grocery sections and adding smaller-format stores are priorities at Target, Chief Executive Officer Gregg Steinhafel said during a conference call on May 19. Same-store sales rose 2.8 percent in the first quarter, Target said May 19 in a statement.
VF reported net income of $163.5 million in its fiscal quarter ended April 3, compared with $100.9 million a year earlier, the maker of Lee and Wrangler jeans said in a May 12 regulatory filing.
“These names are higher quality, defensive in nature, naturally outperforming in times of risk reduction and defensive positioning,” said Nicholas Finkelman, who helps oversee $3.5 billion of bonds as a money manager at New York-based Ryan Labs Inc. “Valuations are a bit rich in these names on a relative basis, but they still have defensive qualities that may prove to be of significant value, if it’s going to be a bumpy ride.”
The bonds have returned 2.8 percent since the end of May as the market gained 1.9 percent, according to Bank of America Merrill Lynch index data. Greensboro, North Carolina-based apparel maker VF Corp., the index’s best performer in June, returned 5 percent for the month.
Retail sales probably expanded at an average monthly rate of 4 percent in the five months through the end of June, the biggest gain since 2006, the International Council of Shopping Centers said before a report due today. Discount retailers such as Wal-Mart Stores Inc. are attractive to investors because consumers are likely to switch to cheaper products if the economy slows, said Payden & Rygel’s Greg Tornga.
“People were out and about, spending money,” said Tornga, head of investment-grade strategy at the Los Angeles-based firm, which has more than $50 billion in assets under management. “They weren’t necessarily spending a lot of money, but it was an improvement over last year.”
Retailer debt returns exceeded the average for U.S. corporate bonds in each of the past three months, Bank of America Merrill Lynch index data show. Retailers returned 3.25 percent in June, compared with 1.89 percent for the market. Bonds from Bentonville, Arkansas-based Wal-Mart, the world’s biggest retailer, returned 3.61 percent last month. Target Corp. of Minneapolis, the second-biggest U.S. discount retailer, gained 4.2 percent.
Time Warner Offering
Elsewhere in credit markets, the extra yield investors demand to own corporate bonds instead of government debt was unchanged at 196 basis points, or 1.96 percentage point, Bank of America Merrill Lynch’s Global Broad Market Corporate index shows. Yields averaged 3.957 percent.
Time Warner Inc., the New York-based owner of the Warner Bros. movie studio and the HBO cable channel, raised $3 billion in a three-part bond offering, its biggest since November 2006.
The company’s $1 billion of 6.1 percent, 30-year bonds yield 215 basis points more than similar maturity Treasuries, compared with the spread of 162 basis points it paid on $600 million of 6.2 percent 2040 bonds issued in March, according to data compiled by Bloomberg.
Bondholder Protection
The cost of protecting corporate debt from default in the U.S. fell for the fourth straight day.
Credit-default swaps on the Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, fell 5.7 basis points to a mid-price of 116 basis points, according to Markit Group Ltd.
In London, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings dropped 1.18 to 123, Markit prices show. The Markit iTraxx Asia index of swaps on 50 investment- grade borrowers outside Japan dropped 9.5 to 130.5 as of 8:20 a.m. in Hong Kong, according to Credit Agricole CIB.
The indexes typically fall as investor confidence improves and rise as it deteriorates. Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
Bank of America Merrill Lynch cut its forecast for U.S. investment-grade debt sales in 2010 to $700 billion from $800 billion, citing growth in company cash balances.
“Many issuers in high grade have flexibility to stay on the sidelines because balance sheets have become increasingly liquid over the past couple of years both for banks and industrials,” Bank of America analysts Hans Mikkelsen and Yuriy Shchuchinov wrote in a report.
Morgan Stanley
Morgan Stanley, owner of the world’s largest brokerage, was the most actively traded U.S. corporate bond yesterday by primary dealers followed by General Electric Co., Bloomberg data show. The most actively traded junk bond was Anadarko Petroleum Corp. High-yield, high-risk debt is rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.
Fannie Mae plans to sell three-year benchmark notes today, the Washington-based mortgage-finance company with U.S. government support said in a statement.
Citigroup Inc., Deutsche Bank AG and UBS AG are managing the transaction, Fannie Mae said. Investors should buy the 3- year notes and sell existing 2-year agency debt after the spread between the maturities “steepened slightly,” according to Jim Vogel, head of agency-debt research for FTN Financial in Memphis, Tennessee.
Retail Sales
The extra yield investors demand to hold emerging-market bonds rather than government notes declined the most in almost a month. The spread tightened 11 basis points to 323 basis points, the most it has narrowed since June 10, according to JPMorgan Chase & Co.’s Emerging Market Bond index.
Retail sales in June probably came in at the high end of a projected 3 percent to 4 percent range, the ICSC trade group said.
“Consumer spending picked up in the first half, and that by itself is very attractive for bond investors,” Lloyd McAdams, chief investment officer at Santa Monica, California- based Pacific Income Advisers, with $4.5 billion of assets under management.
The extra yield investors demand to own retailers’ bonds widened 2 basis points since the end of May to 118, as the overall market expanded 9 basis points to 315, according to Bank of America Merrill Lynch index data.
S&P has upgraded 10 investment-grade consumer non-cyclical borrowers this year and cut 8 issuers, compared with 2 increases and 12 downgrades in the same period last year, Bloomberg data show.
Wal-Mart, Target
Wal-Mart sold $3 billion of debt in a three-part offering on June 30 in its biggest dollar-denominated bond transaction since July 2001, Bloomberg data show.
Wal-Mart, which operates in 15 countries, has benefited from growth in Mexico, Canada and China, as sales declined at U.S. stores amid the worst recession since the 1930s. The company affirmed an earnings forecast on June 4 for second- quarter U.S. same-store sales ranging from a decline of 2 percent to an increase of 1 percent. Comparable-store sales have fallen for four straight quarters.
Target’s $1 billion of 5.375 percent notes due in 2017 have risen 5.77 cents to 114.16 cents on the dollar this year, the highest on record, according to Trace, the bond-price reporting system of Financial Industry Regulatory Authority.
Bigger Grocery Sections
Expanding grocery sections and adding smaller-format stores are priorities at Target, Chief Executive Officer Gregg Steinhafel said during a conference call on May 19. Same-store sales rose 2.8 percent in the first quarter, Target said May 19 in a statement.
VF reported net income of $163.5 million in its fiscal quarter ended April 3, compared with $100.9 million a year earlier, the maker of Lee and Wrangler jeans said in a May 12 regulatory filing.
“These names are higher quality, defensive in nature, naturally outperforming in times of risk reduction and defensive positioning,” said Nicholas Finkelman, who helps oversee $3.5 billion of bonds as a money manager at New York-based Ryan Labs Inc. “Valuations are a bit rich in these names on a relative basis, but they still have defensive qualities that may prove to be of significant value, if it’s going to be a bumpy ride.”
Japan’s Machinery Orders Slump 9.1%, Most Since 2008
July 8 (Bloomberg) -- Japanese machinery orders fell the most since August 2008, a sign that any rebound in business investment may be too weak to drive the economic recovery.
Orders, an indicator of future capital spending, slid 9.1 percent from April, the Cabinet Office said today in Tokyo. It was the first decline in three months, and exceeded the median 3 percent drop in a Bloomberg News survey of 24 economists.
The report prompted Cabinet Office spokesman Keisuke Tsumura to say the economic outlook is becoming less certain, while Bank of Japan Governor Masaaki Shirakawa maintained his view that the economy will keep expanding. Separate figures showed a cooling of exports, which have been the main driver of the nation’s rebound from its worst postwar recession.
“Pressure on the BOJ to ease monetary policy further will continue to increase,” said Kenro Kawano, a debt strategist in Tokyo at Credit Suisse Group AG. “The central bank’s policy is heading toward an easing bias.”
The yen traded at 87.97 per dollar at 10:17 a.m. in Tokyo from 87.83 before the report. Japan’s currency has gained 10 percent in the past three months, threatening to erode exporters’ profit earned abroad. The Nikkei 225 Stock Average climbed 2.7 percent after a trade group said U.S. retail sales grew at the fastest pace in four years.
The drop in machine orders was the biggest since they fell 10.2 percent in August 2008, revised figures showed today. The current-account surplus narrowed 8.1 percent to 1.205 trillion yen ($14 billion) in May from a year earlier as export growth slowed, the Finance Ministry said.
Recovery Trend
“Exports and production are expected to keep increasing,” though at a slower pace, as overseas economies continue to improve, Shirakawa said at a quarterly meeting of the bank’s branch managers in Tokyo today. “Domestic private demand will likely keep improving and the Japanese economy is likely to stay on a recovery trend.”
Shirakawa repeated that the central bank intends to keep a “very accommodative financial environment.” Japan’s central bank has held the benchmark interest rate at 0.1 percent since cutting it December 2008.
As the global recovery helps companies including Elpida Memory Inc. return to profit, businesses have accumulated record stockpiles of cash. A more sustainable recovery depends on them deploying that money as the expansion shows signs of losing steam.
Hoarding Cash
Companies “are just sitting on their cash,” Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo, said before the report. “They have limited plans of investing in Japan because most corporations do not expect the domestic economy to come back strongly.”
Businesses are also holding back on hiring staff. The unemployment rate climbed to a five-month high of 5.2 percent in May while wages dropped, reports showed last week.
Even so, Prime Minister Naoto Kan’s Cabinet raised its view of the economy last month amid signs of a stabilization in capital spending. “The foundation for a self-sustaining recovery is being laid,” the government said in the assessment.
Japanese computer-memory chip maker Elpida is among firms that are planning on spending more as business prospects improve. The Tokyo-based company will boost its investment budget to 115 billion yen ($1.3 billion) this fiscal year from 43.8 billion yen in the year ended March.
Large businesses aim to increase spending by 4.4 percent in the year ending March 2011, the first gain in three years, according to the Bank of Japan’s Tankan survey released last week. Manufacturers expect their profits to more than double in the same period, the Tankan showed.
Japan can’t count on continued surges in overseas demand for much longer, according to economist Tatsushi Shikano.
“Overseas economies will probably begin to lose steam at the end of the year,” said Shikano, senior economist at Mitsubishi UFJ Securities Co. in Tokyo. “That means exports and production may lose momentum, leading to a halt in the increases in capital spending.”
Orders, an indicator of future capital spending, slid 9.1 percent from April, the Cabinet Office said today in Tokyo. It was the first decline in three months, and exceeded the median 3 percent drop in a Bloomberg News survey of 24 economists.
The report prompted Cabinet Office spokesman Keisuke Tsumura to say the economic outlook is becoming less certain, while Bank of Japan Governor Masaaki Shirakawa maintained his view that the economy will keep expanding. Separate figures showed a cooling of exports, which have been the main driver of the nation’s rebound from its worst postwar recession.
“Pressure on the BOJ to ease monetary policy further will continue to increase,” said Kenro Kawano, a debt strategist in Tokyo at Credit Suisse Group AG. “The central bank’s policy is heading toward an easing bias.”
The yen traded at 87.97 per dollar at 10:17 a.m. in Tokyo from 87.83 before the report. Japan’s currency has gained 10 percent in the past three months, threatening to erode exporters’ profit earned abroad. The Nikkei 225 Stock Average climbed 2.7 percent after a trade group said U.S. retail sales grew at the fastest pace in four years.
The drop in machine orders was the biggest since they fell 10.2 percent in August 2008, revised figures showed today. The current-account surplus narrowed 8.1 percent to 1.205 trillion yen ($14 billion) in May from a year earlier as export growth slowed, the Finance Ministry said.
Recovery Trend
“Exports and production are expected to keep increasing,” though at a slower pace, as overseas economies continue to improve, Shirakawa said at a quarterly meeting of the bank’s branch managers in Tokyo today. “Domestic private demand will likely keep improving and the Japanese economy is likely to stay on a recovery trend.”
Shirakawa repeated that the central bank intends to keep a “very accommodative financial environment.” Japan’s central bank has held the benchmark interest rate at 0.1 percent since cutting it December 2008.
As the global recovery helps companies including Elpida Memory Inc. return to profit, businesses have accumulated record stockpiles of cash. A more sustainable recovery depends on them deploying that money as the expansion shows signs of losing steam.
Hoarding Cash
Companies “are just sitting on their cash,” Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo, said before the report. “They have limited plans of investing in Japan because most corporations do not expect the domestic economy to come back strongly.”
Businesses are also holding back on hiring staff. The unemployment rate climbed to a five-month high of 5.2 percent in May while wages dropped, reports showed last week.
Even so, Prime Minister Naoto Kan’s Cabinet raised its view of the economy last month amid signs of a stabilization in capital spending. “The foundation for a self-sustaining recovery is being laid,” the government said in the assessment.
Japanese computer-memory chip maker Elpida is among firms that are planning on spending more as business prospects improve. The Tokyo-based company will boost its investment budget to 115 billion yen ($1.3 billion) this fiscal year from 43.8 billion yen in the year ended March.
Large businesses aim to increase spending by 4.4 percent in the year ending March 2011, the first gain in three years, according to the Bank of Japan’s Tankan survey released last week. Manufacturers expect their profits to more than double in the same period, the Tankan showed.
Japan can’t count on continued surges in overseas demand for much longer, according to economist Tatsushi Shikano.
“Overseas economies will probably begin to lose steam at the end of the year,” said Shikano, senior economist at Mitsubishi UFJ Securities Co. in Tokyo. “That means exports and production may lose momentum, leading to a halt in the increases in capital spending.”
Army takes to streets of Kashmir capital
India sent its army on to the streets of Srinagar, the capital of Kashmir, on Wednesday to enforce a strict curfew, after four civilians were killed in violent clashes between police and angry mobs of youths.
The Muslim-majority Kashmir valley, which is a popular summer holiday spot for India’s affluent middle class, has been rocked by increasingly violent protests since June 14, when a 17-year-old boy was killed, apparently by a stray bullet fired by security forces
In the cycle of angry protests and harsh crackdowns that have followed, another 14 civilians, including many teenagers, have been killed. Each fresh killing has fuelled renewed anger and protests, which have often turned violent and led to more casualties.
Authorities imposed a curfew across Kashmir for several days last week in what Omar Abdullah, the chief minister, described as a necessary measure to “stop this cycle of violence”.
But on Tuesday, protests erupted again and soon turned violent after the retrieval of the body of a teenage boy who locals said had drowned while fleeing police after a protest Monday night.
Indian television showed images of security forces firing straight into mobs of yelling, stone-pelting youth, and also of crowds of angry women marching through the streets.
The renewed bloodshed in Kashmir come as the foreign ministers of India and Pakistan prepare to meet next week in an tenuous effort to revive the peace process, which was suspended after the Mumbai terror attacks in November 2008.
Analysts have expressed concern that the renewed violence could complicate efforts to renew the tentative dialogue. P. Chidambaram, India’s interior minister, last week accused Lashkar-e-Toiba, the Pakistan-based militant group, of fomenting the unrest. An exchange of fire across a usually quiet section of the Kashmir border reported on Wednesday by the armies of each side resulted in the death of two Indian troops and the wounding of one Pakistani soldier and several villagers, Reuters reported.
Kashmiri human rights activists say they believe the protests are an eruption of spontaneous anger at the oppressive presence of the security forces and their lack of accountability for human rights violations, including civilian deaths. In Pakistan on Tuesday, militant groups held anti-India protests.
“I want to assure my brothers in Indian-occupied Kashmir that we will continue to support you until we liberate every inch of our motherland from Indian subjugation,” Syed Salahuddin, a top commander of militant group Hizb-ul-Mujahideen, told protesters.
Kashmir is at the centre of a decades-old dispute between nuclear-armed neighbours India and Pakistan, which have fought three wars over the picturesque Himalayan province.
Throughout the 1990s, Kashmir was rocked by a violent, Pakistan-backed separatist insurgency, but militant violence has declined sharply over the last decade. However, India’s huge military presence remains a source of major friction with the local population, which bristles at the frequent curfews, checkpoints and disruptions.
Kashmiris have been clamouring for the repeal of the Armed Forces Special Powers Act, which they say allows security forces to act with impunity.
The Muslim-majority Kashmir valley, which is a popular summer holiday spot for India’s affluent middle class, has been rocked by increasingly violent protests since June 14, when a 17-year-old boy was killed, apparently by a stray bullet fired by security forces
In the cycle of angry protests and harsh crackdowns that have followed, another 14 civilians, including many teenagers, have been killed. Each fresh killing has fuelled renewed anger and protests, which have often turned violent and led to more casualties.
Authorities imposed a curfew across Kashmir for several days last week in what Omar Abdullah, the chief minister, described as a necessary measure to “stop this cycle of violence”.
But on Tuesday, protests erupted again and soon turned violent after the retrieval of the body of a teenage boy who locals said had drowned while fleeing police after a protest Monday night.
Indian television showed images of security forces firing straight into mobs of yelling, stone-pelting youth, and also of crowds of angry women marching through the streets.
The renewed bloodshed in Kashmir come as the foreign ministers of India and Pakistan prepare to meet next week in an tenuous effort to revive the peace process, which was suspended after the Mumbai terror attacks in November 2008.
Analysts have expressed concern that the renewed violence could complicate efforts to renew the tentative dialogue. P. Chidambaram, India’s interior minister, last week accused Lashkar-e-Toiba, the Pakistan-based militant group, of fomenting the unrest. An exchange of fire across a usually quiet section of the Kashmir border reported on Wednesday by the armies of each side resulted in the death of two Indian troops and the wounding of one Pakistani soldier and several villagers, Reuters reported.
Kashmiri human rights activists say they believe the protests are an eruption of spontaneous anger at the oppressive presence of the security forces and their lack of accountability for human rights violations, including civilian deaths. In Pakistan on Tuesday, militant groups held anti-India protests.
“I want to assure my brothers in Indian-occupied Kashmir that we will continue to support you until we liberate every inch of our motherland from Indian subjugation,” Syed Salahuddin, a top commander of militant group Hizb-ul-Mujahideen, told protesters.
Kashmir is at the centre of a decades-old dispute between nuclear-armed neighbours India and Pakistan, which have fought three wars over the picturesque Himalayan province.
Throughout the 1990s, Kashmir was rocked by a violent, Pakistan-backed separatist insurgency, but militant violence has declined sharply over the last decade. However, India’s huge military presence remains a source of major friction with the local population, which bristles at the frequent curfews, checkpoints and disruptions.
Kashmiris have been clamouring for the repeal of the Armed Forces Special Powers Act, which they say allows security forces to act with impunity.
Owner of Exploded Rig Exploits Offshore Status
Transocean is the world’s largest offshore drilling company, but until its Deepwater Horizon rig exploded in the Gulf of Mexico in April, few Americans outside the energy business had heard of it. It is well known, however, in a number of other countries — for testing local laws and regulations.
Human rights advocates have called for an investigation into Transocean’s recent dealings in Myanmar. They cite its involvement in a drilling project that apparently included a company that is suspected of having ties to two men accused of laundering money for Myanmar’s repressive government, which is under United States trade sanctions.
Transocean has disclosed in Securities and Exchange Commission filings that its drilling equipment was shipped by a forwarder through Iran and that until last year it held a stake in a company that did business in Syria. The State Department says Syria and Iran sponsor terrorism.
In Norway, Transocean is the subject of a criminal investigation into possible tax fraud. The company has said in S.E.C. filings that Norwegian officials could assess it about $840 million in taxes and penalties. The filings also said that a final ruling against Transocean could have a “material impact” on the company, which has suffered a drop in its stock price of more than 40 percent since the Gulf of Mexico incident.
And in the United States, a federal bankruptcy judge recently found that one of Transocean’s merger partners had repeatedly abused the legal system to try to avoid potential liability in a pollution case in Louisiana. Transocean is also the target of tax inquiries in the United States and Brazil.
Transocean declined though an outside spokesman to make company officials available for comment. The company said in a statement that it had always acted appropriately and believed that it would prevail in any investigations.
It is not unusual for large multinational companies like Transocean to find themselves in legal or tax controversies around the world and Transocean has noted the issues that face it in public filings. The company’s most significant safety problem overseas involved a 2007 episode in which eight people died off the coast of Scotland when a support vessel capsized while towing a huge chain used to position a Transocean rig. A Norwegian board of inquiry found that missteps by several parties, including Transocean and the support vessel’s owner, had contributed to the incident.
But the company’s practices in the United States and abroad have come under new scrutiny since the oil spill in the gulf. Last week, the chairman of the Senate Finance Committee, Max Baucus, Democrat of Montana, said that the panel would investigate whether Transocean had used its corporate base in Switzerland to exploit United States tax laws.
In its dealings with lawmakers, Transocean has stood its ground. Last month, in response to a demand that Transocean delay a planned distribution to shareholders of $1 billion in dividends, the company declared that paying the dividend “in no way affects Transocean’s ability to meet it legal obligations.”
Transocean has largely blamed BP, the well’s operator, for the spill, describing it as a company that took shortcuts on safety. Transocean has had a long relationship with BP, and for the last two years, BP has been Transocean’s largest single customer, accounting for 12 percent of its $11.5 billion in operating revenue in 2009, public filings show.
Industry analysts said that strong ties between the companies reflected the fact that both had staked their financial futures on pushing oil exploration as far off shore as possible. Transocean, which drills in some 30 countries and employs more than 18,000 people, owns nearly half of the 50 or so deepwater platforms in the world.
“These people are capable and considered the gold standard of deepwater drilling,” said Peter Vig, managing director at RoundRock Capital Management, an energy hedge fund in Dallas.
Transocean’s evolution into the world’s biggest deep-sea driller follows a decade-long acquisition and merger spree.
It began in 1996 when a Texas-based company called Sonat OffshoreDrilling acquired Transocean ASA, then Norway’s largest offshore driller. Three years later, the company, now known as Transocean, shifted its headquarters for tax purposes to the Cayman Islands from Houston, though a vast majority of its executives still work in Houston,. In subsequent years, it acquired or merged with other drillers including R&B Falcon, the drilling unit of Schlumberger and GlobalSantaFe. Then, in 2008, for tax purposes, it moved its headquarters again, this time to Switzerland from the Cayman Islands.
Human rights advocates have called for an investigation into Transocean’s recent dealings in Myanmar. They cite its involvement in a drilling project that apparently included a company that is suspected of having ties to two men accused of laundering money for Myanmar’s repressive government, which is under United States trade sanctions.
Transocean has disclosed in Securities and Exchange Commission filings that its drilling equipment was shipped by a forwarder through Iran and that until last year it held a stake in a company that did business in Syria. The State Department says Syria and Iran sponsor terrorism.
In Norway, Transocean is the subject of a criminal investigation into possible tax fraud. The company has said in S.E.C. filings that Norwegian officials could assess it about $840 million in taxes and penalties. The filings also said that a final ruling against Transocean could have a “material impact” on the company, which has suffered a drop in its stock price of more than 40 percent since the Gulf of Mexico incident.
And in the United States, a federal bankruptcy judge recently found that one of Transocean’s merger partners had repeatedly abused the legal system to try to avoid potential liability in a pollution case in Louisiana. Transocean is also the target of tax inquiries in the United States and Brazil.
Transocean declined though an outside spokesman to make company officials available for comment. The company said in a statement that it had always acted appropriately and believed that it would prevail in any investigations.
It is not unusual for large multinational companies like Transocean to find themselves in legal or tax controversies around the world and Transocean has noted the issues that face it in public filings. The company’s most significant safety problem overseas involved a 2007 episode in which eight people died off the coast of Scotland when a support vessel capsized while towing a huge chain used to position a Transocean rig. A Norwegian board of inquiry found that missteps by several parties, including Transocean and the support vessel’s owner, had contributed to the incident.
But the company’s practices in the United States and abroad have come under new scrutiny since the oil spill in the gulf. Last week, the chairman of the Senate Finance Committee, Max Baucus, Democrat of Montana, said that the panel would investigate whether Transocean had used its corporate base in Switzerland to exploit United States tax laws.
In its dealings with lawmakers, Transocean has stood its ground. Last month, in response to a demand that Transocean delay a planned distribution to shareholders of $1 billion in dividends, the company declared that paying the dividend “in no way affects Transocean’s ability to meet it legal obligations.”
Transocean has largely blamed BP, the well’s operator, for the spill, describing it as a company that took shortcuts on safety. Transocean has had a long relationship with BP, and for the last two years, BP has been Transocean’s largest single customer, accounting for 12 percent of its $11.5 billion in operating revenue in 2009, public filings show.
Industry analysts said that strong ties between the companies reflected the fact that both had staked their financial futures on pushing oil exploration as far off shore as possible. Transocean, which drills in some 30 countries and employs more than 18,000 people, owns nearly half of the 50 or so deepwater platforms in the world.
“These people are capable and considered the gold standard of deepwater drilling,” said Peter Vig, managing director at RoundRock Capital Management, an energy hedge fund in Dallas.
Transocean’s evolution into the world’s biggest deep-sea driller follows a decade-long acquisition and merger spree.
It began in 1996 when a Texas-based company called Sonat OffshoreDrilling acquired Transocean ASA, then Norway’s largest offshore driller. Three years later, the company, now known as Transocean, shifted its headquarters for tax purposes to the Cayman Islands from Houston, though a vast majority of its executives still work in Houston,. In subsequent years, it acquired or merged with other drillers including R&B Falcon, the drilling unit of Schlumberger and GlobalSantaFe. Then, in 2008, for tax purposes, it moved its headquarters again, this time to Switzerland from the Cayman Islands.
Monday, July 5, 2010
HSBC Clients With Asian Accounts Said to Face U.S. Tax Probe
July 6 (Bloomberg) -- The Justice Department is conducting a criminal investigation of HSBC Holdings Plc clients who may have failed to disclose accounts in India or Singapore to the Internal Revenue Service, according to three people familiar with the matter.
One client got a letter from the Justice Department in late June that said prosecutors had “reason to believe that you had an interest in a financial account in India that was not reported to the IRS on either a tax return” or a Treasury Department report disclosing foreign accounts, according to a copy read to Bloomberg News by a lawyer for one of the clients.
“This is a global initiative by IRS and the Department of Justice,” said Robert McKenzie, an attorney at Arnstein & Lehr in Chicago who said he spoke to two people who got letters.
The probes show how the U.S. is expanding its crackdown on offshore tax evasion beyond Switzerland and UBS AG, the largest Swiss bank, said Barbara Kaplan, a tax lawyer at Greenberg Traurig LLP in New York. London-based HSBC is Europe’s biggest lender by market value.
“It’s clear that the IRS and the Department of Justice are intending to pursue other depositors outside of Switzerland,” Kaplan said. “They’ve announced it before, and they are moving forward in that regard.”
The letters could mean that prosecutors got data on HSBC account holders from the bank, McKenzie said.
“My speculation is that there has to be some level of cooperation within HSBC, or someone within HSBC providing these names to the government,” McKenzie said. “I would bet, under pressure, HSBC cooperated.”
HSBC spokeswoman Diane Bergan declined to comment.
The UBS Agreement
UBS avoided prosecution last year by admitting it aided tax evasion from 2000 to 2007, paying $780 million, and agreeing to disclose secret account data on more than 250 clients. It later agreed to disclose data on another 4,450 clients.
Seventeen UBS clients, two bankers and three alleged enablers of tax crimes have been prosecuted since the bank signed the deferred prosecution agreement. Another 15,000 U.S. residents sought to avoid prosecutions last year by disclosing offshore accounts.
IRS Commissioner Douglas Shulman said last October his agency was scouring those disclosures “to identify financial institutions, advisers and others” who helped taxpayers cheat on taxes. He said the IRS is hiring 800 people in the next year and increasing staff in eight overseas offices, including Hong Kong. It also will open offices in Beijing, Sydney and Panama City.
Not Named
The letters don’t mention HSBC by name yet are all directed to people with accounts at the bank, according to lawyers who saw them. About a dozen HSBC clients got letters in late June from Kevin Downing, a senior attorney in the Justice Department’s tax division who led the UBS probe, according to the people.
Tax attorney Larry Campagna said that prosecutors often give taxpayers a chance to explain their accounts to the Justice Department. Campagna represents clients of banks in the offshore tax investigation and hasn’t seen the letters.
Sometimes such letters leads to a guilty plea, and sometimes there’s an explanation that causes a prosecution to drop the investigation, said Campagna of Chamberlain Hrdlicka in Houston.
The letters went to U.S. residents who have ties to India, including people who inherited money from relatives or maintained assets there after leaving the country, according to three lawyers who read them and asked not to be identified. Some letters referred to undisclosed bank accounts in Singapore, two of the lawyers said.
Not Just UBS
“We’ve been telling our clients that the non-disclosure of foreign accounts is not just a UBS problem,” said tax attorney Richard Sapinski of Sills Cummis & Gross in Newark, New Jersey, represents clients in the offshore investigation. He doesn’t have a client who got a letter.
“We’ve spoken to the prosecutors and high-level people in the IRS, and our conclusion was they were going to pursue people with undisclosed foreign accounts anywhere for a very long time to come,” he said.
Several weeks ago, Downing toured Singapore, Hong Kong and Beijing, meeting with regulators and bankers about offshore tax prosecutions. He spoke to tax lawyers at a conference sponsored by New York University on June 18.
“We just took down the largest private wealth management bank in the world,” Downing said, referring to UBS. “Do you really think we’re going to have trouble doing the next one?”
No UBS Redux
He referred to his tour in Asia, saying: “Neither the banks nor the governments want to have a UBS-type situation. They want to do it nice and quiet. They don’t want to be the focus of attention. The Department of Justice and IRS are devoting a ton of resources to this issue.”
The Justice Department has charged three HSBC clients with tax crimes in the past year.
A Virginia surgeon, Andrew Silva, was sentenced to two years probation after admitting he hid assets at HSBC from U.S. tax authorities and smuggled more than $200,000 in cash to his home when the bank said it would close his Swiss bank account.
Two Miami Beach hotel developers, Mauricio Cohen Assor and his son Leon Cohen Assor, were indicted on charges of hiding more than $150 million in assets from the IRS, including accounts held at HSBC. They have pleaded not guilty and face a Sept. 7 trial in federal court in Fort Lauderdale, Florida.
One client got a letter from the Justice Department in late June that said prosecutors had “reason to believe that you had an interest in a financial account in India that was not reported to the IRS on either a tax return” or a Treasury Department report disclosing foreign accounts, according to a copy read to Bloomberg News by a lawyer for one of the clients.
“This is a global initiative by IRS and the Department of Justice,” said Robert McKenzie, an attorney at Arnstein & Lehr in Chicago who said he spoke to two people who got letters.
The probes show how the U.S. is expanding its crackdown on offshore tax evasion beyond Switzerland and UBS AG, the largest Swiss bank, said Barbara Kaplan, a tax lawyer at Greenberg Traurig LLP in New York. London-based HSBC is Europe’s biggest lender by market value.
“It’s clear that the IRS and the Department of Justice are intending to pursue other depositors outside of Switzerland,” Kaplan said. “They’ve announced it before, and they are moving forward in that regard.”
The letters could mean that prosecutors got data on HSBC account holders from the bank, McKenzie said.
“My speculation is that there has to be some level of cooperation within HSBC, or someone within HSBC providing these names to the government,” McKenzie said. “I would bet, under pressure, HSBC cooperated.”
HSBC spokeswoman Diane Bergan declined to comment.
The UBS Agreement
UBS avoided prosecution last year by admitting it aided tax evasion from 2000 to 2007, paying $780 million, and agreeing to disclose secret account data on more than 250 clients. It later agreed to disclose data on another 4,450 clients.
Seventeen UBS clients, two bankers and three alleged enablers of tax crimes have been prosecuted since the bank signed the deferred prosecution agreement. Another 15,000 U.S. residents sought to avoid prosecutions last year by disclosing offshore accounts.
IRS Commissioner Douglas Shulman said last October his agency was scouring those disclosures “to identify financial institutions, advisers and others” who helped taxpayers cheat on taxes. He said the IRS is hiring 800 people in the next year and increasing staff in eight overseas offices, including Hong Kong. It also will open offices in Beijing, Sydney and Panama City.
Not Named
The letters don’t mention HSBC by name yet are all directed to people with accounts at the bank, according to lawyers who saw them. About a dozen HSBC clients got letters in late June from Kevin Downing, a senior attorney in the Justice Department’s tax division who led the UBS probe, according to the people.
Tax attorney Larry Campagna said that prosecutors often give taxpayers a chance to explain their accounts to the Justice Department. Campagna represents clients of banks in the offshore tax investigation and hasn’t seen the letters.
Sometimes such letters leads to a guilty plea, and sometimes there’s an explanation that causes a prosecution to drop the investigation, said Campagna of Chamberlain Hrdlicka in Houston.
The letters went to U.S. residents who have ties to India, including people who inherited money from relatives or maintained assets there after leaving the country, according to three lawyers who read them and asked not to be identified. Some letters referred to undisclosed bank accounts in Singapore, two of the lawyers said.
Not Just UBS
“We’ve been telling our clients that the non-disclosure of foreign accounts is not just a UBS problem,” said tax attorney Richard Sapinski of Sills Cummis & Gross in Newark, New Jersey, represents clients in the offshore investigation. He doesn’t have a client who got a letter.
“We’ve spoken to the prosecutors and high-level people in the IRS, and our conclusion was they were going to pursue people with undisclosed foreign accounts anywhere for a very long time to come,” he said.
Several weeks ago, Downing toured Singapore, Hong Kong and Beijing, meeting with regulators and bankers about offshore tax prosecutions. He spoke to tax lawyers at a conference sponsored by New York University on June 18.
“We just took down the largest private wealth management bank in the world,” Downing said, referring to UBS. “Do you really think we’re going to have trouble doing the next one?”
No UBS Redux
He referred to his tour in Asia, saying: “Neither the banks nor the governments want to have a UBS-type situation. They want to do it nice and quiet. They don’t want to be the focus of attention. The Department of Justice and IRS are devoting a ton of resources to this issue.”
The Justice Department has charged three HSBC clients with tax crimes in the past year.
A Virginia surgeon, Andrew Silva, was sentenced to two years probation after admitting he hid assets at HSBC from U.S. tax authorities and smuggled more than $200,000 in cash to his home when the bank said it would close his Swiss bank account.
Two Miami Beach hotel developers, Mauricio Cohen Assor and his son Leon Cohen Assor, were indicted on charges of hiding more than $150 million in assets from the IRS, including accounts held at HSBC. They have pleaded not guilty and face a Sept. 7 trial in federal court in Fort Lauderdale, Florida.
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