New York Attorney General Sues JPMorgan Chase

The New York Attorney General sued JPMorgan Chase on Monday, alleging that Bear Stearns, the troubled investment bank it bought in 2008, “kept investors in the dark” about the quality of the mortgage-backed bonds it was selling as the market started to sour.

The lawsuit is the first legal action against a Wall Street bank to come from a joint federal and state task force announced by President Barack Obama during his State of the Union address in January. It alleges civil fraud violations, which means that potential penalties will be measured in dollars, not jail terms. Nevertheless, the JPMorgan Chase lawsuit qualifies as one of the more significant actions taken by a law enforcement agency to date against a Wall Street bank.

JPMorgan Chase acquired Bear Stearns in March 2008 in a deal brokered and supported by the federal government.

According to the lawsuit, filed in Manhattan federal district court, Bear promised a “robust and intensive” review process for selecting loans for sale to investors. But Bear didn’t do that, according to the complaint. In order to continue the securitization machine — the packaging and sale of home loans to investors — the bank increasingly placed risky loans into the bonds, even as an outside contractor it had hired to evaluate those loans was warning the bank about their poor quality.

That vendor, Clayton Homes, sampled the quality of the loans Bear wanted to package and sell. At one point the vendor identified 17 percent of the loans in a bond as defective. Nevertheless, Bear put half of those loans in a mortgage-backed security.

“Defendants systematically failed to fully evaluate the loans, largely ignored the defects that their limited review did uncover, and kept investors in the dark about both the inadequacy of their review procedures and the defects in the underlying loans,” the lawsuit says. “Furthermore, even when Defendants were made aware of these problems, they failed to reform their practices or to disclose material information to investors.”

Largely as a result of these delinquencies and defaults, the lawsuit claims, the mortgage bonds have suffered tremendous losses. The current cumulative realized losses on over 100 subprime and Alt-A securitizations in the years 2006 and 2007 total approximately $22.5 billion, or approximately 26 percent of the original principal balance of approximately $87 billion, the lawsuit says.

The lawsuit is the first to describe systemwide misconduct at one of the banks. Other cases, such as the Securities and Exchange Commission’s allegations against Goldman Sachs that led to an earlier $550 million settlement, focused on alleged fraud in the sale of one product.

The task force — officially, the Residential Mortgage-Backed Securities Working Group — was formed at the urging of New York Attorney General Eric Schneiderman, who was frustrated that more had not been done to hold accountable the Wall Street banks that packaged and sold the mortgage-backed bonds that imploded, nearly bringing down the U.S. economy.

Schneiderman co-leads the task force, along with Robert Khuzami, the enforcement director of the SEC; Lanny Breuer, the head of the criminal division at the Justice Department; Stuart Delery, the head of Justice’s civil division; and John Walsh, the U.S. Attorney for the District of Colorado.

UPDATE 6:49 p.m. — In a statement, a JPMorgan Chase spokeswoman said the bank was disappointed that Schneiderman “decided to pursue its civil action without ever offering us an opportunity to rebut the claims and without developing a full record – instead relying on recycled claims already made by private plaintiffs.”

The bank will contest the allegations, the spokeswoman said.

Judith Samuelson: Business and the Grand Challenges

In New York City, it’s the season for tackling the Grand Challenges. On one side of town, the UN is now in session, and the streets are filled with presidents, prime ministers, ambassadors and their entourage.

Across town in Times Square, the Clinton Global Initiative just wrapped up their annual forum for both talk and taking action. World leaders were featured, but the stage was shared with their counterparts in business and “civil society.” The agenda? Tackling the very, very big issues: economic opportunity and job creation, climate change, poverty, hunger and “food security.” Difficult, almost intractable problems.

Among all the talk and good intentions, one knotty problem persists: How does large scale change actually take root?

The Clinton platform seems to have developed a viable model; working through member “commitments,” a pledge of cash or capacity, or often both, applied to a Grand Challenge. Alcoa, for example, just announced an important $2MM package of grants and partnerships to move the needle on low recycling rates in the U.S.. Deutsche Bank committed a new $50MM credit facility to back social enterprises. Typically, the featured company is working in partnership with one or more nonprofits, sometimes including universities and trade groups. Last year, PepsiCo pledged to work alongside the World Food Programme and USAID to help Ethiopian farmers feed malnourished children.

The Clinton platform promotes public-private partnerships, as a way for business to align itself with nonprofit or government capacity, and vice versa.

Today, a company’s motivation to involve itself in such initiatives only grows: there is opportunity to link a company’s brand with social goals — the kind of goals that resonate with employees, new recruits, the public and those who offer the the license to operate and influence industry regulation. Sometimes a commitment can even deliver top line or bottom line results. For Alcoa, recapturing aluminum is consistent with their environmental goals, but it also delivers raw material with tangible value. This is a good thing.

But as important and useful as the Clinton platform is, let’s face reality. An individual corporate brand rarely matches the complexity of the issue at hand. The demonstration value should not be underestimated, but on problems as complex as waste recovery, global warming, or human trafficking — which President Obama addressed in his speech at CGI, government action is also critical, especially the kinds of policies that influence behavior, set market conditions and raise the bar.

However, in an era where the private sector seems like a better bet than government, what more can business do to move from company initiative to systemic change? Here are two avenues to pursue:

One is to ratchet up business to business partnership — B2B collaboration. Before Alcoa announced its new campaign, it did something remarkable. It invited other business actors, from competitors to suppliers to soft drink manufacturers to retailers, all of whom have a role to play in the recycling of aluminum cans, to commence an action-oriented dialogue. To do this well, to get your competitors to play along, it cannot be about your own brand. Alcoa’s action goes way beyond the typical public-private partnership. It has the potential to move the beast. Other companies are working to advance B2B collaborations as well, and smart NGOs today, like BSR, specialize in industry working groups for that reason.

Second, business leaders need to raise their voice in setting policy that puts the long-term health of society first. Business is the most influential institution we have. We need business to weigh in on policy if we are to reach large scale change.

In Roger Martin‘s book Fixing the Game, he captures the connective tissue between business and government. The civil foundation of any society is not static, he says. As an economy advances, so do the laws and norms that support the system–be it health and safety laws or public infrastructure. As “major actors in modern society” Rogers reminds us that global-trotting companies have the potential to deeply affect the evolution of the civil foundation — for good or for ill. The ones that consistently work to “add bricks to and strengthen the robustness of the foundation” deserve our support. It goes way beyond what we typically think of as social responsibility.

The complexity of this task on the global stage is daunting; companies like Alcoa that are working in a strategic way to enhance society, may also strengthen the business. Let’s hope so.

Alleged Red Sox Fan Invested In The Yankees

Another day, another bizarre Mitt Romney investment.

The self-proclaimed Red Sox fan and former Massachusetts governor invested in the Yankees empire in 2007, according to his financial disclosure form from that year. For those of you living under a rock, the Red Sox and the Yankees are bitter rivals.

Of course, the investment was made through Romney’s blind trust, or a set of investments made for Romney that he doesn’t directly control. The undisclosed share in the Yankees, spotted by Buzzfeed, is just the latest in a slew of controversial investments to be pegged to the Republican nominee. For one, documents leaked by Gawker in August turned up Romney investments that tied him to industries like casinos and cigarettes, which may not exactly jive with the Mormon church.

Still, the Yankees investment is particularly ironic, given that the Romney campaign turned an Obama jab at the Red Sox into a campaign issue. Though as Buzzfeed notes, it seems Romney dropped the Yankee share by 2012.

From Romney’s 2007 financial disclosure form:

romney yankee investments

Amtrak-Truck Crash Leaves Many Injured

HANFORD, Calif. — Two cars and the locomotive of an Amtrak train carrying about 169 passengers derailed Monday after colliding with a big rig truck in California’s Central Valley, authorities said.

At least 20 passengers suffered minor to moderate injuries, authorities said.

The 12:25 p.m. crash occurred when the driver of the tractor-trailer carrying cotton trash failed to yield and hit the train, authorities said. The impact pushed the two passenger cars and the locomotive off the tracks south of Hanford, a farming town.

The train traveled about 600 feet after the collision before hitting a switchback and derailing, according to California Highway Patrol Officer Scott Harris.

Officials have not determined how fast the train or the truck were going, but the average speed for Amtrak through the area is 70 to 80 mph, while the speed limit on the roadway where the truck was traveling is 55 mph, Harris said.

After the crash, metal pieces from the truck could be seen inside the train, which was covered by cotton seeds. Several pieces of luggage were also scattered around the area.

Kings County Assistant Sheriff Dave Putnam described the injuries to passengers as bumps, bruises, scrapes and possibly broken bones.

The crash occurred at a crossing that was equipped with gates to stop traffic, Putnam said.

Eight of the injured passengers were taken to Adventist Medical Center in Hanford and five more were expected, said hospital spokeswoman Christine Pickering. She did not provide details on the extent of their injuries.

“We did call in additional physicians and staff,” Pickering said.

Four additional injured passengers were taken to nearby Adventist Medical Center in Selma, while seven people were taken to Community Regional Medical Center in Fresno, officials said.

The train was on its way from Oakland to Bakersfield, according to Amtrak. It had four rail cars and a locomotive.

The truck driver suffered minor injuries, according to California Highway Patrol spokesman Jerry Pierce. Investigators will try to determine if the crash was caused by driver error, a malfunctioning crossing arm, or something else, the CHP said.

“This is a big, huge chaotic scene with lots of agencies involved,” Pierce said.

Pierce said the other passengers have been taken to an auditorium in Hanford, where they will board a train and continue to their destinations or family members will pick them up.

All train service through the area has been stopped, with the work of moving the derailed rail cars and repairing the tracks expected to last through early Tuesday, officials said.

“The estimates are that we would have it open in time for the morning rush hour,” said Amtrak spokesman Cliff Cole.

Meanwhile, authorities were at the scene of a second accident involving a freight train and a tractor-trailer about 10 miles away.

In the second collision, which took place around 4 p.m., the truck driver suffered major injuries, according to the CHP. No additional details have been released.

Apple Removes Chomp Website and App, Shuts Down Existing App Installs

Following the introduction of the new Chomp-styled App Store layout in iOS 6, built upon Apple’s acquisition of the app search and discovery platform earlier this year, Apple over the weekend shut down the standalone Chomp service.



Chomp had previously been available as both website and app tools for iOS and Android, but Apple killed off the Android functionality in late April following its acquisition of Chomp. The Chomp website and iOS app remained functional until this weekend, however, when Apple removed the Chomp app from the App Store and redirected the Chomp website to apple.com.

As noted in our forums, existing users of the iOS app have also been shut out, as Apple has discontinued the service effective yesterday.

Chomp has been discontinued as of September 30. Thanks for being a loyal user.



Apple’s new Chomp-inspired App Store layout for iOS has drawn a fair amount of criticism, with some users complaining that search and discovery is much more difficult with the new interface showing just a single search result at a time.


Supreme Court may narrow law in human rights cases

WASHINGTON (Reuters) – The Supreme Court seemed skeptical on Monday of allowing victims of human rights abuses to sue in American courts against the foreign corporations accused of aiding in the atrocities.

Pirelli main shareholder in contact with possible investors

MILAN, Oct 1 (Reuters) – Contacts have been made with
Italian and foreign investors interested in taking a stake in
tyre maker Pirelli’s main shareholder, Camfin
, though nothing concrete is on the…

Apple Support: Purple Flaring Is “Normal Behavior” For iPhone 5 Camera

iphone5-camera

Earlier, we reported that Apple’s iPhone 5 seemed to have some issues with purple flaring when taking photos with a light source just in or off frame, as reported by a number of users and duplicated in tests. Today, Gizmodo reader Matt Van Gastel received a response from Apple’s engineering team routed through a support representative which essentially says that behavior isn’t cause for concern. According to the email from Apple:

[W]e recommend that you angle the camera away from the bright light source when taking pictures. The purple flare in the image provided is considered normal behavior for iPhone 5′s camera.

Of course, long-time Apple watchers will recognize this approach to dealing with what seem to be hardware problems with iPhones, since it’s very similar to what the company initially said about the iPhone 4′s reception issues, which was basically ‘you’re holding it wrong.‘ But in this case, there’s reason to believe Apple might actually be correct. TechCrunch reader and photographer Adam Panzica explains in a note posted to our original story:

As many others have stated, this kind of thing happens very frequently in cameras of all types. I actually remember there being a firmware update to my Canon 7D to address this issues with certain less and lighting combinations. It’s a result of certain light frequencies being reflected/refracted in the lens from the off-angle light source. It might look like lens flare on a larger glass, but on something this thin it’s probably always going to look like a purple haze. You simply cannot beat the laws of physics. High end DSLRs have whole image processors a hell of a lot more advanced than the one in a cellphone dedicated to removing this kind of thing. But it still shows up from time to time, especially with new glass.

The bad news, as Adam points out, is that it’s largely unavoidable, at least in terms of getting rid of it completely. The good news is that as mentioned, it’s the type of effect that’s been addressed or improved elsewhere via firmware update, so Apple could potentially develop a way to compensate for it occurring in iPhone 5 in later versions of iOS, and it might even go away with time.

In the meantime, this is more of a nuisance bug than a game-ender; I’ve yet to have it happen to my photos in the general course of taking pictures, other than when I was trying to make it happen. The response from Apple’s customer support team may not be particularly comforting to those who are seeing this problem with any frequency, but I wouldn’t be surprised if it’s the last word from Apple on the matter of the purple haze.