THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

Good ol' Troy.

You think that's just a coincidence, John?

You know the territory much better than I do.

What's your take?

Posted by IronMike on January 27, 2008 12:54 PM

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THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

My take is and has been, Mike, that Joe Bruno's TROY in New York State's Rensselaer County is the EPICENTER of this SCAM ....

And I base that on a stack of official government records, including Federal Bureau of Investigation records, plus direct experience in Rensselaer County as a New York State licensed professional engineer from 1986 on who was also certified as an associate level public health engineer in New York State ....

Joe Bruno's PONZI, Mike ...

Joe Bruno's carefully constructed HOUSE OF CARDS IS coming tumbling down ....

Fancy people are going to be caught with their pants down in public is my thought, Mike ....

It's like Salmon swimming back to where they were born, is one way of looking at it .....

Certainly, chickens are coming back home to roost .....

BOGUS APPRAISALS ....

BOGUS HEALTH DEPARTMENT CERTIFICATIONS AND APPROVALS ....

QUESTIONABLE TITLE SEARCHES ....

A PONZI ....

Flip some property back and forth with some shills .....

And then sucker some fool ....

EXCEPT ....

Worthless property is worthless property .....

And eventually ....

The price of the PONZI gets to be too great, like all PONZIS ....

And then, they collapse ....

I would say that it was a money funnel, Mike .....

People from elsewhere had money that needed to be cleaned up, so running it through land subdivisions and property transfers was a good way to do that, because nobody looks at where that money came from, or how ....

And once the LAUNDRY is up and running good, YOU CAN'T STOP!

People who need to move big sums of money have to keep that money moving, so they need more and more property transfers ....

But the "reality" of what is actually being sold cannot bear them ....

A WORTHLESS PROPERTY IS IN THE END STILL WORTHLESS DESPITE WHAT YOU PAID FOR IT ....

As the engineers say, that is a SUNK COST ....

And there you are ....

Just as if you owed a bundle for a boat that just sank to the bottom of the sea .....

SUCK IT UP, DUDE, YOU'RE NOW THE ONE WHO HAS JUST BEEN SCREWED ...

And so ....

Posted by John Galt on January 27, 2008 2:42 PM

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THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

WHEN YOU READ THE WORDS OF FED CHAIRMAN BEN BERNACKE IN THIS NEWS ARTICLE, Mike ....

TO ME, IT IS AS IF HE IS SPEAKING DIRECTLY TO TROY AND RENSSELAER COUNTY RIGHT HERE IN THE STATE OF NEW YORK ...

"Fed endorses home mortgage protections"

By JEANNINE AVERSA, Associated Press

Last updated: 5:52 p.m., Tuesday, December 18, 2007

WASHINGTON -- The Federal Reserve moved Tuesday to protect home buyers from dubious lending practices, its most sweeping response to a mortgage meltdown that has forced record numbers of people from their homes.

The Fed has been under attack for not doing more to stem the crisis as hundreds of thousands of people lost the roof over their head.

The situation raised the odds the country will fall into recession, unhinged Wall Street, racked up multibillion losses for financial companies and resulted in political finger-pointing over who was to blame.

"Unfair and deceptive acts and practices hurt not just borrowers and their families, but entire communities, and indeed, the economy as a whole."

"They have no place in our mortgage system," Fed Chairman Ben Bernanke said.

"We want consumers to make decisions about home mortgage options confidently, with assurance that unscrupulous home mortgage practices will not be tolerated," he said.

end quotes

UNFAIR AND DECEPTIVE PRACTICES = RENSSELAER COUNTY IN THE STATE OF NEW YORK ...

And so ...

Posted by John Galt on January 27, 2008 2:58 PM

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THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

And it isn't as if any of this has ever been any kind of a secret, Mike ....

Here is what the FBI had to say about matters in Rensselaer County vis-a-vis BOGUS land certifications and appraisals by the CORRUPT REPUBLICAN-contolled Rensselaer County Department of Health in a March 16, 1989 Report of the Federal Bureau of Investigation, which was before Bush-appointee federal District Court Judge Gary L. Sharpe in Albany in 2005 as an exhibit in a Motion for Injunctive Relief submitted to federal District Court for the northern District of New York in 2005 by the engineer Paul R. Plante up here in Rensselaer County:

"According to [name deleted], the results of the State's investigation were that New York State laws were not being followed by the Rensselaer County Health Department, Rensselaer County laws were not being followed by the Rensselaer County Health Department, and there was very little 'enforcement activity' even in the face of illegal sales."

"According to [name deleted], the object of any county health department (in the state of New York) is to protect the public, and not to facilitate developers, or development."

"In the case of Rensselaer County, it appears that the Rensselaer County Health Department was in business to facilitate developers and development rather than to protect the public!"

end quotes

FACILITATE DEVELOPERS AND DEVELOPMENT!

FACILITATE: to make easier ...

- Webster's New Collegiate Dictionary

And so ....

Posted by John Galt on January 27, 2008 3:12 PM

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THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

AND TALK ABOUT FACILITATION, ALRIGHT!

HERE ARE FINDINGS OF FACT OF FEDERAL DISTRICT COURT JUDGE GARY L. SHARPE IN 2005 AS TO EXACTLY WHAT KINDS OF CONDUCT BY LAND DEVELOPERS WERE BEING FACILITATED IN RENSSELAER COUNTY AS LATE AS 2001 ....

WHICH IS THE SAME KIND OF CONDUCT THAT WAS BEING FACILITATED IN RENSSELAER COUNTY WHEN THE FBI POSTED ITS FINDINGS IN 1989 ....

And so ....

III. FACTS:

On May 22, 2001, Jeffey Pelletier was issued a sewage system construction permit by the County of Rensselaer.

On July 7 (2001), PLAINTIFF (Paul R. Plante, NYSPE) conducted an investigation of defendants Aiken (engineer) and McGrath’s “deliberate falsification of inspection data and fraudulent submissions” resulting in the issuance of the Pelletier permit.

During PLAINTIFF'S investigation, Pelletier assaulted him.

On August 9 (2001), defendant Reiter (Rensselaer County Director of Veterans’ Services Robert "BOB" Reiter) warned PLAINTIFF to “back off” the Pelletier investigation because he (Pelletier) was a “protected person” in the county.

On August 17 (2001), defendant Jimino (Rensselaer County Executive Kathleen Jimino) allegedly phoned PLAINTIFF threatening to harm him if he did not stop his investigation.

end quotes

"DELIBERATE FALSIFICATION OF INSPECTION DATA AND FRAUDULENT SUBMISSIONS" RESULTING IN THE ISSUANCE OF A RENSSELAER COUNTY HEALTH DEPARTMENT SEWAGE SYSTEM CONSTRUCTION PERMIT ......

There is the GAME, Mike ....

THERE IS THE SCAM ....

BOGUS APPRAISALS OF LAND ....

And as I said ....

It never was a secret .....

Just a story not widely told before this ....

And so ....

Posted by John Galt on January 27, 2008 3:23 PM

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THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

JOE BRUNO'S PONZI ....

THE LAND SCAM ....

Here's Joe pushing it in the newspapers right out in plain sight while on the public's dime ....

And so ....

"Bruno: Big economic news ahead - Senate majority leader offers few details; says new name to emerge in governor's race"

By JAMES M. ODATO, Capitol bureau, Albany, New York Times Union

First published: Friday, December 30, 2005

ALBANY -- Senate Majority Leader Joseph Bruno braced reporters Thursday for exciting economic news coming to the Capital Region and a mystery candidate who may emerge soon to run for governor.

"If you own property you're happy people."

"If you don't own property, go buy some."

"It's going to be a great investment around here."

Asked about assertions that Attorney General Eliot Spitzer threatened former Goldman Sachs Chairman John Whitehead in a telephone conversation in April, Bruno said the charges of bullying are so serious that an independent review is in order.

Posted by John Galt on January 27, 2008 6:55 PM

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"Thruway closed between Buffalo, Rochester by whiteout conditions"

Associated Press

Last updated: 2:36 p.m., Wednesday, January 30, 2008

CHEEKTOWAGA, N.Y. -- State police say the Thruway is closed between Buffalo and Rochester after numerous accidents caused by blowing snow.

The state police Thruway detail says the eastbound and westbound lanes are closed Wednesday afternoon between Exit 46 at Henrietta, near Rochester, to Exit 49 in Cheektowaga, just east of Buffalo.

Troopers say some injuries have been reported from the accidents along the 60-mile stretch of Interstate 90, but no details are immediately available.

Whiteout conditions caused by winds gusting to more than 50 miles an hour are being reported in western New York.

THE DAILY STANDARD

'Spitzer Struggles - A scandal that just won't go away."

by Kevin Kusinitz

01/30/2008 12:00:00 AM

BETWEEN GROWING UP IN Rhode Island and later moving to New York, I've witnessed a lifetime of political corruption.

It's part of the landscape, like barren trees in the winter and obese tourists in the summer.

When an elected official vows to "clean up the capitol," I calmly wait for the headline that features his or her name followed by the words "under investigation."

And so it is with New York Governor Elliot Spitzer.

As Attorney General, Spitzer was known as the Sheriff of Wall Street, bringing down the wing tipped bad guys with a loaded subpoena and a grimace that would make Richard Widmark shudder.

To me, he always seemed like the kind of guy who'd go after a self-employed accountant for not cleaning out the coffee filter.

It wasn't until he successfully sued several record companies in a payola scandal that I grudgingly gave him his due.

Anyone who forces an industry to pay the price for putting Jennifer Lopez on the public airwaves is okay by me.

Not okay enough for me to actually vote for him, but enough to give him a 100-day pass upon election.

"Day one, everything changes": that was Gov. Spitzer's promise, alluding to George Pataki's administration.

It was bad enough that the rebuilding of Ground Zero went nowhere during his hapless third term.

What was worse, to his one-time supporters anyway, was the way Pataki--distracted by a possible presidential run--watched the destruction of the state Republican party with the interest of a halfwit studying a dustbunny.

So to most New Yorkers, "Day one, everything changes" sounded mighty good indeed.

Unfortunately, in no time that promise was replaced by the livelier "I'm a f---ing steamroller, and I'll roll over you."

Spitzer might have been talking to Republican minority leader James Tedisco, but it was definitely a warning shot to anyone else who dared disagree with him.

Enter Senate Majority Leader Joe Bruno.

A powerful upstate Republican, Bruno was suspected of abusing state-owned helicopters for personal use.

Spitzer, in response, abused state troopers by ordering them to spy on Bruno.

When it hit the papers, Spitzer first claimed no knowledge of the crime, blaming overzealous aides.

When that proved untrue, Spitzer did what he does best: telling New Yorkers to mind their own business or, if that didn't work, to go to hell--and don't forget to pay the toll on your way down.

In an apparent effort to run out the clock, Spitzer stalled.

Aides presented with subpoenas claimed executive privilege.

Computer hard drives containing potentially implicating evidence disappeared.

E-mails went missing.

By August, Attorney General Andrew Cuomo, refusing to be intimidated, announced he was widening his investigation.

In what might have been a curious way of taking heat off the scandal, Spitzer announced his plan to give drivers licenses to illegal aliens.

That's like distracting cops from your child pornography collection by showing off your meth lab.

On the other hand, it created the opportunity for yet another classic Spitzer quote.

When Mayor Mike Bloomberg gently questioned the wisdom of licenses for illegals, the always-diplomatic governor replied, "He is wrong at every level--dead wrong, factually wrong, legally wrong, morally wrong, ethically wrong."

And you thought Rudy Giuliani was bullheaded.

One of the latest chapters of Troopergate involves investigator Herbert Teitelbaum, who doubles as the executive director of the Public Integrity Commission.

(I know--integrity in Albany?)

Apparently needing a little R&R from the scandal, Teitelbaum--a lawyer friendly with Spitzer's aides--recently took a two-and-a-half week vacation to South America.

And just so he can afford the ducle de leche, he received a $15,000 raise.

Now for all you cynics out there, Elliot Spitzer didn't hand out this raise.

No sir.

It was, instead, approved by the commission's chairman, John Feerick . . . who just happens to be a Spitzer appointee.

While State Democrats haven't publicly condemned their leader's behavior--for that he'd have to do something really reprehensible, like approve school vouchers--neither have they defended him.

Indeed, a little over six months after his inauguration, some were already griping that he was going to be a one-termer.

And no wonder.

The vindictive crime, the sloppy cover-up and subsequent stonewalling, the missing evidence, paranoid tongue-lashings and angry denials--even the shifty eyes and perpetual five o'clock shadow--Gov. Spitzer is positively Nixonian.

"Day one, everything changes."

Did it ever.

Almost immediately upon taking office, New York's Democratic governor created a scandal that refuses to go away and, in doing so, revived a state Republican party that was considered dead two years earlier.

Perhaps Elliot Milhous Nixon might reconsider his choice of heavy equipment.

Far from being a steamroller, he more resembles a steam shovel, digging his political grave.

Kevin Kusinitz is a writer living in New York.

http://www.weeklystandard.com/Content/Publ...4oyuyv.asp?pg=1

"Spitzer: NY bond insurer rescue advances"

By JOE BEL BRUNO, Associated Press

Last updated: 5:22 p.m., Thursday, January 31, 2008

NEW YORK -- New York Gov. Eliot Spitzer said Thursday a plan by the state's insurance regulator to bail out struggling bond insurers is making good progress amid fresh worries about the financial industry.

Spitzer said the plan is mindful the federal government might soon take a more active role.

Among those advising the state on a rescue is New York Federal Reserve Bank President Timothy Geithner.

"We are having conversations with experts," Spitzer told reporters in New York City.

He added that the state is "not going out ahead of where the Fed and Treasury would want us to be" and that it is making "good progress" at capital raising.

A number of bond insurance companies are struggling to stay in business as rating agencies demand they raise more capital.

There have been concerns for the past few months that bond insurers might not have enough capital to guarantee billions of dollars in debt imperiled by the subprime mortgage crisis.

The financial health of bond insurers such as MBIA Inc., Ambac Financial Group Inc., and ACA Capital Holdings Inc. could jeopardize some $2.4 trillion of debt the industry guarantees.

New York State Insurance Superintendent Eric DiNallo hired advisory firm Perella Weinberg to help find to help find fresh capital for bond insurers.

He has also approached investor Wilbur Ross, a specialist in buying distressed assets, among others.

Capital injections might come from overseas, said David Neusted, a spokesman for the commission.

Major global banks like Merrill Lynch & Co. and Citigroup Inc. have received capital injections from investment funds run by foreign governments.

However, specifics about the plan have not been disclosed -- drawing criticism from some analysts that the rescue might have been started too late.

Schumer said the process for rating municipal bonds must be examined, because it differs from that for corporate bonds and often results in states and municipalities paying higher interest rates even though their default rate is comparable those of companies.

That forces states to take out more bond insurance -- money that could go to building affordable housing, Schumer said in a letter to Moody's.

Financial markets are rife with speculation that more downgrades could come this week.

There is also concern about the poor quality of the assets held by the insurers -- which could prove tough to sell.

"No one wants to touch the toxic waste," said T.J. Marta, a fixed-income analyst at RBC Capital Markets.

"No one in their right mind would want to buy them."

--------

Associated Press business writers Marcy Gordon in Washington and Leslie Wines in New York contributed to this report.

"FBI director: mortgage fraud substantial"

By JAYMES SONG, Associated Press

Last updated: 3:12 a.m., Friday, February 1, 2008

HONOLULU -- FBI Director Robert Mueller said Thursday that the agency is committed to investigating and prosecuting companies involved in mortgage fraud and other violations in connection with home loans made to risky borrowers.

Mueller said probes were being conducted across the country, including in Hawaii, where he stopped on his way back from a trip through Asia.

"There is not a state that does not have some investigation," he told reporters at the FBI office in Honolulu.

"It is a substantial problem but we've been through problems like this in the past."

The FBI said Tuesday it was working with the Securities and Exchange Commission to investigate 14 companies, from mortgage lenders to investment banks, for possible accounting fraud, insider trading or other issues connected to subprime mortgage lending.

Mueller declined to identify the companies.

The FBI allocated substantial manpower and resources to address the savings and loan crisis in the early 1990s and corporate fraud earlier this decade, and Mueller said he was prepared to do the same to address fraudulent lenders.

"I anticipate that we will see the same extensive investigations that we saw then with successful prosecutions following those investigations," Mueller said.

As the nation's housing crisis worsens, there has been a dramatic spike in the number of mortgage fraud cases under investigation.

An FBI spokesman said 1,210 such cases are open, up from roughly 800 a year ago.

The bureau is looking into the practices of so-called subprime lenders, as well as potential accounting fraud by financial firms that hold subprime loans on their books or securitize them and sell them to other investors.

During his trip to Asia, Mueller met Chinese officials in charge of security for this summer's Olympic Games in Beijing.

He also was in Cambodia to inaugurate an FBI office at the U.S. Embassy in Phnom Penh.

"Bruno's labor ties probed - Albany area unions get federal subpoenas for information about investments made through the Senate majority leader's former employer"

By JAMES M. ODATO, Capitol bureau, Albany, New York Times Union

First published: Sunday, February 3, 2008

ALBANY -- Federal agents have demanded business records from several Albany-area labor unions that have sent tens of millions of dollars to investment firms that employed state Senate Majority Leader Joseph L. Bruno over the past decade, according to labor representatives and other sources.

FBI agents served subpoenas last week on the unions' pension and welfare fund leaders.

The unions include Laborers Local 190 and Teamsters Local 294, among others.

The FBI told the labor organizations to produce records involving Wright Investors Service of Milford, Conn., and its holding company, Winthrop Corp., Bruno's longtime employers before his abrupt resignation in December.

The subpoenas, signed by Assistant U.S. Attorney Elizabeth Coombe of the Albany office, also call for any union records involving Bruno and his Brunswick consulting company, Capital Business Consultants.

Coombe said Saturday she had no comment.

James E. Long, a lawyer for Local 190, said the labor group received a subpoena on Wednesday.

He said his client has not yet produced the records but will cooperate.

The demand for the documents requires they be turned over by Feb. 14.

Teamsters Local 294 lawyer Bruce Bramley, who also represents several other area labor groups, said he could not confirm or deny "anything."

The FBI has been looking into some of Bruno's outside business interests for about two years.

Bruno, the top Republican in the state and majority leader since 1995, served as a business development agent for Wright, or Winthrop Corp., since about the time he took over his leadership post in the Senate.

Both the firm and Bruno said in December it was better to break ties because people have been focusing on his employment with Wright.

That, Bruno said at the time, "has taken attention away from more pressing issues such as our efforts to address the critical needs of our state going forward."

He has maintained that he has done nothing illegal or improper.

Federal investigators have been taking information from Bruno's business associates for a federal grand jury, according to subpoenas and interviews.

The probe, which stretched to Bruno's friends, acquaintances and horse-breeding business, seemed to have stalled in recent months as Bruno's wife, Barbara, struggled with a chronic illness.

She died Jan. 7.

The emergence of the union subpoenas last week is the first sign this year that the FBI has not discontinued its interest in Bruno's financial affairs.

Bruno spokesman John McArdle on Saturday would not say if Bruno had been served a subpoena or a request for information regarding his work with Wright, Winthrop or Capital Business Consulting.

Nor would he say if Bruno had been paid a salary, or a commission, for steering business to the investment management house over the years.

"Sen. Bruno has cooperated fully and completely with the inquiry and ended his employment with Wright Investment last year," McArdle said.

When asked by reporters, the senator has been unwilling to disclose details of his work for Wright and has refused to reveal his consulting clients.

Wright, through a spokesman, said Saturday the firm would not say if it had received subpoenas.

It stated: "Bruno has assured us ... that relevant authorities concluded that his business relationship with us posed no substantive conflict-of-interest issues."

Wright handles pension investments for several labor unions, many based in the Albany area.

The amount of money invested through Wright has been substantial over the years, although some of the unions, such as those representing bricklayers, have diversified and reduced Wright's involvement.

For instance, an article in Pensions & Investments magazine in 2003 said Local 190 retained Wright to manage $36 million from its $80 million pension plan after using Independent Fiduciary Services (IFS) as an adviser.

Long said the union's pension fund was dissatisfied with the returns and doesn't use Wright anymore.

A smaller welfare fund sends some of its $5.5 million portfolio to Wright managers, he said.

Albert Catalano, the leader of the Bricklayers and Allied Craftworkers Local 2 from 1998 to 2005 and now regional director for the international unit of the union, said Wright managed about $20 million of the group's pension fund beginning in the early 1990s.

"I was never made aware during my relationship with Wright that they had Joe Bruno," he said.

He said that before he left office, the union began decreasing the sums it sent Wright to manage.

James M. Odato can be reached at 454-5083 or by e-mail at jodato@timesunion.com.

"Four killed as storm brings ice, snow to upstate NY"

By JESSICA M. PASKO, Associated Press

Last updated: 7:29 p.m., Friday, February 1, 2008

ALBANY -- At least four people died in traffic accidents on ice-slicked Hudson Valley roads Friday as snow, freezing rain and sleet moved into upstate New York.

Three people were killed when their car slid into an oncoming sanding truck on an icy road in the town of East Fishkill.

The driver, 26-year-old Thomas Michelin of Hopewell Junction, was killed along with passenger Lisa Schoonmaker, 29, and her son, 7-year-old Joseph Avis Jr., police said.

The crash happened at about 10:30 a.m. on a county highway.

Two-year-old Zachery Avis was taken to Westchester Medical Center, where he was listed in serious and guarded condition.

Town of East Fishkill Police Lt. Douglas Lucy said the road was covered with snow and ice, and conditions were probably at their worst when the accident happened.

A 39-year-old man died in a head-on collision in the town of Goshen when he lost control of his car and slid into oncoming traffic, police said.

David Degroat of New Hampton died in the crash at around 8 a.m., said Goshen Police Sgt. Allen Faust.

Two people in the car he collided with suffered minor injuries.

The Orange County Sheriff's Department said there were at least two pileups involving five or more cars on Rt. 17 and even more cars sliding off the road on I-84.

About 100 accidents were reported in Ulster and Dutchess Counties.

Troopers reported more than 200 accidents along the New York State Thruway -- concentrated along the stretch between Syracuse and Kingston -- mostly cars sliding off the road and into guard rails.

As of Friday evening, there hadn't been any fatal accidents or serious injuries, troopers said.

Much of the precipitation had turned to rain by Friday afternoon, and the National Weather Service issued a flash flood warning for much of the lower Hudson Valley until around 10 p.m.

"Sitel Corp. call center to bring 400 jobs to upstate NY"

Associated Press

Last updated: 10:52 a.m., Thursday, January 31, 2008

ERWIN, N.Y. -- New York officials say customer service provider Sitel Corp. will convert a former Corning Inc. plant into a call center that will eventually bring about 400 workers to Steuben County.

Sitel says it will invest $5.5 million in the 45,000-square-foot facility in the town of Erwin.

Most of the workers will be customer service representatives.

Gov. Eliot Spitzer announced the development Thursday and says Sitel -- which has 67,000 employees in 27 countries -- will get $1.5 million in grants from the state if it meets certain requirements and another $750,000 grant for job training.

Sitel Chief Operating Officer Chad Carlson cites the area's good quality of life and a well-educated work force for choosing the Southern Tier site.

THE NEW YORK TIMES

"Investigation Into Bruno Broadens"

By DANNY HAKIM

Published: February 4, 2008

Federal authorities have widened their investigation of the Senate majority leader, Joseph L. Bruno, issuing subpoenas to pension funds affiliated with union locals in and around the senator’s Albany-area district, people with knowledge of the investigation said.

Half a dozen union locals in the Albany area have invested tens of millions of dollars with a Connecticut investment firm that has long employed the senator.

Mr. Bruno and the investment firm, Wright Investors’ Service, severed their ties shortly after The New York Times revealed the investments in December, but neither has been willing to detail what the senator’s job was, beyond saying it was related to “business development.”

The subpoenas, which were issued last week and seek records related to Wright and Mr. Bruno, were reported Sunday in The Times Union of Albany.

It is the first indication in several months that the roughly two-year-old federal investigation into Mr. Bruno’s outside business interests remains active.

It is not clear how many of the union locals have been subpoenaed.

Mike Roberts, who recently became head of an Albany-area branch of Unite Here, a union of hotel and restaurant workers, said his local had been subpoenaed.

“We’re just obviously perusing the documents and cooperating,” he said.

The Times Union reported that James E. Long, a lawyer for Laborers’ Local 190 in Albany, said the local had been subpoenaed Wednesday.

Another lawyer in Mr. Long’s office said on Sunday that Mr. Long would not comment further.

John McArdle, a spokesman for Mr. Bruno, said:

“We’ve cooperated with the inquiry."

"He’s not been accused of anything, and I think that’s all we’re saying.”

In a statement, Wright Investors’ Service said, “Mr. Bruno has assured us that he consistently disclosed his employment with Wright Investors’ Service in public filings and that relevant authorities concluded that his business relationship with us posed no substantive conflict-of-interest issues.”

William C. Pericak, who is head of the Albany office of the United States attorney’s office for the Northern District of New York, declined to comment on the investigation.

For more than a decade, Mr. Bruno earned a salary from Wright, based in Milford, Conn., in addition to his legislative pay of $121,000.

His affiliation with the company began shortly before he became majority leader in 1995.

Neither the amount of his salary nor the specifics of his job have been disclosed, and such disclosure is not required under state ethics laws.

A review of tax records by The Times, however, found that pension funds affiliated with a number of union locals have invested tens of million of dollars with Wright; many of the investments appear to have been initiated or increased during Mr. Bruno’s tenure.

A number of the pension funds’ trustees also have longstanding political relationships with Mr. Bruno, who has been a close ally of labor unions in the Legislature.

Some of the trustees even personally lobbied Mr. Bruno about legislative issues, state records and interviews with the officials revealed.

Records also show that prominent locals in New York City invested at various times with Wright, including the New York City District Council of Carpenters and Local 32BJ of the Service Employees International union.

Mr. Bruno, the state’s top Republican, first revealed the federal investigation in December 2006 but said it had been going on for some time.

Previously, the investigation appeared to focus in large part on a consulting business that Mr. Bruno has run out of his home.

The F.B.I. has subpoenaed a number of friends and associates of the senator who are clients of the consulting business.

But it has never been clear what kind of consulting work the senator does, and he has never released a list of his clients.

Whether any ethics rules or criminal laws have been broken remains to be seen.

State ethics law allows officials to have outside employment, but they cannot engage in activities that create or appear to create a conflict with their public duties.

They can be prosecuted for obtaining unwarranted privileges for themselves or others.

THE NEW YORK DAILY NEWS

"Albany unions support Joe Bruno despite chill of FBI subpoenas"

Monday, February 4th 2008, 4:00 AM

Senate Majority Leader Joe Bruno's longstanding marriage with organized labor may be headed for a breakup.

Labor leaders publicly reiterated their support for Bruno and his GOP Senate majority following news that the FBI had slapped Albany-area unions with subpoenas in an ongoing probe of the senator's outside business interests.

But even as they insisted there is "nothing to" the FBI investigation, union bigs privately conceded the subpoenas are one more chink in the Republican powerhouse's armor.

"The conventional strategy of many building trades and public sector unions is about to end," one highly placed labor leader said.

"They've made their bets on Bruno, but it's all unraveling."

Last Friday, several capital region building trades locals, including the laborers, painters, carpenters and Teamsters, got subpoenas for documents related to Bruno and his consulting company, Capital Business Consultants.

The FBI also wants documents related to Wright Investors Service of Milford, Conn., and its holding company, Winthrop Corp.

Bruno worked for Winthrop as a business development agent from about 1995, when he became majority leader, to last December, when he severed his ties to the company.

The unions have sent tens of millions of dollars to Wright to manage, but insisted they didn't know the company was paying Bruno.

It's unclear if Bruno disclosed his Wright connection to his union allies.

A union source said the FBI's requests were sweeping, adding:

"They really want everything," including cell phone logs, travel records and receipts from any meals, drinks and gifts provided to Bruno.

The subpoenas, first reported by the Albany Times Union, are returnable Feb. 14.

The FBI probe, which Bruno made public in December 2006, seemed to be on the back burner recently as the senator's wife, Barbara, battled Alzheimer's.

She died Jan. 7.

A source familiar with the investigation suggested it recently kicked into high gear because the five-year statute of limitations on most federal cases is looming.

The FBI sought information from the unions dating to 2003.

A Bruno spokesman said the lawmaker is cooperating with the FBI.

He has not been charged with any wrongdoing.

Stephen Madarasz, spokesman for the Civil Service Employees Association, the state's largest public workers union, said the subpoenas "won't make a difference, on the whole," in the organization's "warm relationship" with Bruno.

"All it is at this point is some questions," he said.

Madarasz also noted that the CSEA, like many other unions, is being pulled in two directions after having supported both Bruno and Gov. Spitzer.

The governor has made no secret of his desire to help his fellow Democrats end GOP control of the Senate, which soured Spitzer's relationship with Bruno and led to the Troopergate scandal.

The Democratic Party controls every statewide elected office, and its enrollment numbers are growing statewide as the GOP's shrink.

As a result, labor is increasingly hedging its bets when it comes to control of the Senate, where the Republicans hold a slim two-seat majority - with one upstate seat up for grabs in a Feb. 26 special election.

ebenjamin@nydailynews.com

http://www.nydailynews.com/news/politics/2...o_despite_.html

"Analysis: After Giuliani, GOP Senate regroups to keep majority"

By MICHAEL GORMLEY, Associated Press

Last updated: 3:32 p.m., Sunday, February 3, 2008

ALBANY -- Rudy Giuliani's withdrawal from Tuesday's New York primary ended his chance to ride the top of the statewide ballot in November and is another fresh blow to Republicans hoping to keep their decades-long majority in the state Senate.

"Giuliani at the top of the ticket, at least outside New York City, is a real, real plus," said Maurice Carroll of the Quinnipiac University polling institute.

"But it's gone."

"I don't think McCain will be a drag, but the 'America's mayor' aura and the strength of Giuliani looked good for the Republican ticket."

Many say flat out that Democrats will take the state Senate in November.

They point to the Democrats' growing 5:3 voter advantage statewide, the surprise resignation of one veteran Republican and the announced retirement of another in recent weeks.

Republicans are left with a one-seat majority in the 62-seat house in the otherwise Democrat-controlled state government.

"It seems to me that the majority is gone, in one way or another," said Douglas Muzzio of Baruch College of the City University of New York who specializes in voter behavior.

"Democrats are putting a lot of money into these downstate districts," he said, referring to districts in Queens and on Long Island, "where all the old guys are ready to topple."

Muzzio discounts state Senate Republican leader Joseph Bruno's strategy of appealing to voters to keep Republicans in charge as a check on Democratic Gov. Eliot Spitzer and the Democrat-controlled Assembly.

"Most voters do not think of these sophisticated, balance equations," he said.

"It is clear that Senate Republicans were counting on Rudy Giuliani to bring out the vote," said Curtis L. Taylor, spokesman for Senate Democratic leader Malcolm A. Smith.

"Rudy dropping out of the presidential race was a big blow."

But private law firms are filled with people who felt they could knock Bruno out.

"Underestimating Joe Bruno is done at one's own peril," advised Steven Greenberg of the Siena College poll.

Siena's January poll shows the Giuliani loss isn't catastrophic.

New York Republicans were already moving toward McCain when Giuliani was tanking.

McCain, like the former New York City mayor, can appeal to New York's more moderate flavor of Republican including those in the New York City suburbs where GOP state senators need coattails to ride.

"I think it builds on Giuliani support," Bruno said.

"You have two now in New York, instead of just Rudy."

"You now have McCain as a partner for us."

Bruno said McCain could also draw more conservative and independent New Yorkers to the polls.

That was a tougher task for Giuiliani, who supported some more liberal social positions including abortion rights.

"We're very upbeat and very positive about his benefit," Bruno said of McCain.

For a time, it appeared Republicans were strengthening their hold on the Senate after Bruno spent 2007 turning back the Democratic tide that helped Democrats sweep statewide races in November 2006.

Giuliani, himself atop the early polls in 2007, was a big part of Bruno's plan to drum up votes and cash for the 2008 legislative races.

Yet in the last three weeks at least some of that unraveled.

Veteran Republican Sen. Jim Wright of Watertown announced his retirement, then postponed it a couple weeks rather than risk a special election on Tuesday's primary day that could draw too many Democrats.

Then last week veteran Republican Sen. Mary Lou Rath of suburban Buffalo announced that she would be stepping down at the end of her term Dec. 31.

That opens up a level fight come the fall elections in the district with 86,604 Republicans and 78,631 Democrats.

Surprisingly, Democrats have a real chance in both races.

Rath's move upset some Republican senators.

They would have preferred that she retire immediately to set up a quiet special election that would have at least given them a chance to focus on retaining the seat, then building up the new Republican during the session.

So even if the Republicans win the Rath and Wright seats, they do so at the expense of time, effort and money that they can't afford to spread thinner.

And they still need resources to fight off anticipated and serious Democratic challenges to Republican seats like those held for decades by Sens. Serphin Maltese of Queens and Caesar Trunzo of Suffolk County.

Democrats also seem more secure these days in their recently won seats in Westchester and Onondaga counties -- both of which were long held by Republicans.

And all of this teetering of the Republican majority assumes there will be no more surprises, like Maltese, Trunzo or any number of other retirement-age GOP senators figuring a decade or two of Albany is more than enough for their families or their health.

"Clearly these are district-by-district races," Miringoff said.

"But right now it looks like Democrats are very eager to show up and Republicans are not."

------

Michael Gormley is the Albany, N.Y., capitol editor for The Associated Press. He can be reached by e-mail at mgormley(at)ap.org.

AND HERE IS AN IDEA THAT I FIRST HEARD MENTIONED BACK IN THE 1970's, I BELIVE IT WAS ....

YADA, YADA, YADA ...

TALK, TALK, TALK ...

BUT NEVER ANY ACTION ..

AND TO COMPOUND THE PROBLEM ...

PEOPLE HAVE NO MEMORIES ...

THEY DON'T REMEMBER WHAT WAS SAID FIVE SECONDS AGO ...

LET ALONE LAST YEAR, OR THE YEAR BEFORE ...

TOO MUCH REALITY TV ...

NOT ENOUGH REAL LIFE ...

AND NO AWARENESS OF THE WORLD AROUND THEM ...

JUST WHAT IS IN THERE INSIDE THE FLAT TV SCREEN ...

And so ...

"Executive budget aims to get more doctors upstate"

By VALERIE BAUMAN, Associated Press

Last updated: 1:03 p.m., Sunday, February 3, 2008

SARANAC LAKE, N.Y. -- In secluded corners of upstate New York and impoverished neighborhoods around New York City, the sick are less likely to see a doctor.

Hours from a big city, and a helicopter ride away from certain specialized medical treatments, Adirondack Medical Center is one of New York's medical outposts, struggling to compete with large metropolitan teaching hospitals when it comes to hiring physicians.

"It's what keeps us awake at night," AMC CEO Chandler Ralph said.

"How are we going to get enough doctors to take care of our community?"

That question could be answered with a new idea Gov. Eliot Spitzer announced as part of his executive budget.

He's proposing an initiative to pay off student loans for doctors as a reward for working in underserved areas.

"Doctors Across New York" is supposed to help the more than 25 percent of New York's population who live in areas designated as underserved, according to the governor's office.

It would set aside $2 million a year to create a physician loan repayment program that would help as many to 100 doctors a year.

If the doctor stays in an underserved area for the minimum requirement of two years, 30 percent of the loan would be paid off.

Payments would grow each year to the point where it would be paid off after five years.

The repayment maxes out at $150,000.

The Department of Health estimates that underserved areas need more than 300 primary care physicians just to escape the classification of "health professional shortage areas," defined as more than 3,500 people for each physician.

In parts of New York City -- within an hour of some of the best medical care in the world -- the poor have limited access to care, or at least quality care, because of doctor shortages.

"The salaries are poor, the neighborhoods are poor and it's not really an attractive place for people to go and work," said Dr. Marcelo Venegas-Pizzarro, the chief medical officer for Housing Works.

He works in parts of Brooklyn and New York City.

Housing Works helps the poor, homeless and those living with HIV/AIDS.

But the need is great.

In some cases, doctors who work in these areas do it because they want to serve needy populations, but that's not always the case, Venegas-Pizzarro said.

"You see doctors that aren't top notch doctors working in underserved areas because they can't get other work," he said.

Surrounded by sprawling woods and mountains, Saranac Lake is beautiful but isolated and, in winter, one of the coldest spots in the state.

Adirondack Medical Center is based there, but has five satellite offices the region.

The Saranac Lake facility is modern, but little touches -- like frames displaying nearly two decades of fish lures and arrows that had once been embedded in emergency room patients -- are a reminder that this is a country community of just 5,000 people.

AMC needs to hire six doctors in various specialties.

They currently have 48 physicians, but it's a hostile recruiting environment.

They lost one doctor who was earning $150,000 a year to a Seattle practice that paid him $450,000 -- plus a $50,000 signing bonus.

Currently, half of all resident physicians leave New York state after completing their training.

The average physician in the United States graduating in 2006 had $130,571 in student loan debt, according to the American Medical Association.

For New Yorkers graduating from a state public school that average is $129,000, according to the Spitzer administration.

The average debt is $160,000 for those who attend private universities in New York.

Janice Charles is the executive director of the North Country Children's Clinic in Watertown, which serves rural Franklin, Jefferson, Lewis and St. Lawrence Counties.

"We had to cut back on taking new patients here for a while because we had very limited physician time," Charles said.

"So that means patients had to do things like go to the emergency room in the hospital, which is a much more expensive visit."

After turning new patients away, a new hire allowed the clinic to take on new patients again last October and November.

Charles said the approximately 70 new patients represents the large number of people who were probably having limited treatment options until the staff change.

"(Patients) were not feeling so good when we had the shortages of staff," Charles said.

"Folks were frustrated that they couldn't get in unless it was a real emergency."

It can take more than a year to fill an empty position at the Adirondack Medical Center, Ralph said.

Sometimes hospitals hire physicians to work as "temps" for as long as six months, but it costs 30 to 50 percent more.

Spitzer's plan could bring the relief that rural and inner-city hospitals need.

But hospital administrators will have to cross their fingers until the final budget comes out.

"I think everybody knows about the problem, they've recognized the challenge and they're getting the best minds together to see what they can do," Ralph said.

------

On the Net: http://www.ny.gov/governor/sos/fact--sheet5.html.

"Senator blasts Spitzer over teacher-sex investigators"

By MICHAEL GORMLEY, Associated Press

Last updated: 6:34 p.m., Monday, February 4, 2008

ALBANY -- Senate Education Committee Chairman Stephen Saland said the Spitzer administration "is effectively saying it's OK to have open season on children" because it rejected a Board of Regents proposal to hire more investigators of teacher sex cases involving students.

"I find it absolutely bizarre, appalling and beyond comprehension," Saland, a Poughkeepsie Republican, said at a budget hearing on Monday.

"This will be fixed."

There are now three full-time investigators and two more staffers who investigate part-time.

Each has a case load of 100 allegations and there is a backlog of hundreds more, Saland said after meeting with state Education Department officials.

At issue is part of the Board of Regents' budget request to Gov. Eliot Spitzer.

The state Education Department in the current year is using $1 million to fingerprint teachers and prospective teachers as part of a criminal background check.

In addition, the Regents requested $1.4 million more for the fiscal year beginning April 1 to pay for additional fingerprinting of more teachers and other resources including more investigators and support staff, said department spokesman Tom Dunn.

Spitzer, however, has rejected the $1.4 million request and cut the $1 million for the processing of fingerprints in half, because his administration plans to buy high-technology scanners to improve the fingerprinting process at less cost.

But Spitzer budget spokesman Jeffrey Gordon said most budget requests had to be trimmed because of a $4.4 billion deficit and declining growth in revenues.

For example, high-technology scanners will make criminal background checks of prospective teachers more efficiently.

But the request for funding for more investigators was denied.

"There will be no less investigation done," Gordon said.

"In a difficult budget year, we are trying to find efficiencies in every area of state government."

Saland said additional investigators are "critical for the protection of students."

"I agree with that," state Education Commissioner Richard Mills said, while being questioned by legislators in the budget hearing.

"I believe this was a misunderstanding," said Mills, who reports to the Legislature-appointed Board of Regents, not Spitzer.

"I could be completely wrong."

"Then the governor should fire the damn bean counters who made the mistake and apologize to every school kid in New York," Saland said.

At the hearing Saland, a longtime sponsor of bills in this area, noted that the vast majority of the state's 225,000 teachers shouldn't be seen as abusers or sympathetic to abusers.

But he said his experience shows the teacher sexual contact with students happens far too often, and he read two passages from recent Associated Press stories that showed the extent of the misconduct.

The number of "moral conduct" accusations against teachers, administrators and aides has doubled in five years.

In all, 485 misconduct cases were reported over five years, most of them involving sexual misconduct.

The state Board of Regents elevated the issue to among its top priorities of the state legislative session this year.

The board presses its case by noting there was a 400 percent increase in complaints against teachers from 2001 to 2007, with 75 percent of actions against certified teachers involving sex.

Experts who track sexual abuse say those cases are representative of a much deeper problem among the 3 million public school teachers nationwide.

Spitzer, a former prosecutor, has said he wants to work with the Board of Regents to address the concerns.

The 2008-09 state budget is scheduled to be adopted by the Legislature in time for the April 1 start of the fiscal year.

THE NEW YORK POST

"SPITZ AIDE FACING SLAP OVER SCANDAL 'He wants to wrap this thing up quickly, bringing the investigation to a close.'"

February 4, 2008 -- THE state Public Integrity Commission could seek disciplinary action against a former top aide to Gov. Spitzer at a meeting Friday, while Senate investigators prepare for a new hearing on the Dirty Tricks Scandal four days later.

Sources said the commission's executive director, Herbert Teitelbaum, may ask the 13-member Spitzer-controlled panel to approve a "notice of reasonable cause" against Darren Dopp, the governor's former communications director.

The sources said the notice would charge Dopp with violating the state Ethics Law by using the State Police to gather evidence purportedly damaging to Senate Majority Leader Joseph Bruno (R-Rensselaer), which he then leaked to an Albany newspaper.

Teitelbaum, who has been accused by Republicans and some close to Dopp of trying to cover up for Spitzer in the scandal, told associates that "he wants to wrap this thing up quickly, bringing the investigation to a close," a source told The Post.

A notice of reasonable cause is the equivalent of an administrative indictment and would set in motion a public disciplinary procedure that could result in Dopp - who was suspended by Spitzer last summer for his involvement in the scandal - being fined or censured for an Ethics Law violation.

Dopp, who now works for Spitzer-connected lobbyist Patricia Lynch, is also the subject of a grand-jury investigation being conducted by Albany County District Attorney David Soares.

Meanwhile, the Republican-controlled Senate Investigations Commission has slated a hearing for a week from tomorrow to take testimony from electronic-communications experts on the use of BlackBerry and other telephone and Internet devices - and the backup computer- server records that document their use - by Spitzer and members of his administration.

Officials from RIM, or Research in Motion, a key provider of BlackBerry services for the governor's office, are expected to testify.

Spitzer is battling a subpoena issued by the Senate committee for e-mail and other electronic-communications records connected to the scandal.

Soares, who even Spitzer-administration insiders concede has sought to cover up the scandal, is harshly described as "docile" and "not independent" by Senate Re publicans in a newly filed state Supreme Court brief.

The brief, submitted in response to Spitzer's challenge to the Senate subpoenas, notes that Soares "conducted no grand-jury probe, spoke to no one under oath and received only documents that were voluntarily turned over to him" during what he claimed was a thorough investigation of the scandal in late August.

The brief charges that Soares' "method of investigation seemed unusually casual, remarkably narrow and, as a consequence, unremarkable and unreliable in its outcome."

fredric.dicker@nypost.com

http://www.nypost.com/seven/02042008/news/...ndal_251165.htm

THE NEW YORK SUN

"The Competition in Spitzer"

By JACOB GERSHMAN

February 4, 2008

"I have a competition in me.

I want no one else to succeed."

— Daniel Plainview, "There Will Be Blood"

The candid admission by cinema's hardest-working oilman appeals to a sentiment that isn't totally alien to New York's hardest-working politician, Eliot Spitzer.

His taste for cutthroat competition is just as strong as when he first stormed into Albany.

At first glance, the retooled governor comes off as passive, mellow, and improbably polite.

This year, he hasn't handed down to the Legislature any Commandments.

In public settings, he hasn't spoken ill of Joseph Bruno.

He released a budget that took pains not to offend any interest group.

He's even willing to grant lawmakers a pay raise without the strings attached.

Look closer and you'll see that our governor has a master plan.

His war on Mr. Bruno and the Senate Republicans hasn't subsided; it just turned cold.

Instead of launching missile strikes into Bruno country, Mr. Spitzer is fighting by proxy, deploying his political troops and money to the arctic North Country, the site of a raging special election race on which the fate of Republican control of the Senate hinges.

Mr. Spitzer has yet to voyage there to campaign personally on behalf of the Democratic candidate, assemblyman Darrel Aubertine — the governor's depressed poll numbers discourage such overt public involvement — but his presence is felt nonetheless, especially by union leaders who have infuriated the administration by endorsing the Republican challenger, assemblyman Will Barclay.

In dealing with the Legislature's multitude of egos, agendas, and alliances, the governor is trying out a new tack.

David Margolick, writing in Vanity Fair on the governor's travails, theorized that Mr. Spitzer feels, at least vaguely, that he's "slumming" in Albany.

It was his sense of distinction between his worth and that of the Albany establishment that tricked the governor into thinking he could lead by simply issuing commands to lawmakers.

Mr. Spitzer may still feel that he's slumming.

The difference now is that he believes he has figured a way to rise above the territorial and prosaic passions of the Legislature.

In other words, he is content to distance himself from the legislative process.

He articulates the thematics of his agenda: Moderate, but not late-Pataki-years excessive, spending growth; some version of a property tax cap; a redistribution of Medicaid money; universal health care access, and a more centralized education policy.

Lawmakers then legislate.

And the details are just that.

The governor's shift in thinking on the limitations and proper exercise of executive power could serve as a useful lesson to Barack Obama, whose promise of sweeping national change recalls Mr. Spitzer's "Day 1: Everything Changes" mantra in 2006.

The governor doesn't have a Plan B that he could turn to in the event that Senate Republicans survive beyond 2008.

In his mind, he's not thinking in terms of "if" but "when" Democrats seize power.

Time, he figures, is on his side.

Mr. Bruno, whose exit would leave a power vacuum in his conference, will be 79 in April.

Mr. Spitzer plans to be governor until 2012 or 2014, depending on if he runs for president.

If Republican John McCain wins in November, don't count out that possibility.

In the meantime, Mr. Spitzer is positioned to take advantage of the fragility of Mr. Bruno's majority.

Republicans are restricted.

They cannot afford to break ranks with New York State United Teachers and the other major labor unions, whose money, foot soldiers, and organization are critical this election year.

The dependency has scrambled the Republican platform.

They complain about property taxes but fear upsetting the teachers union by joining the governor in support of imposing a property tax cap on school districts.

My sense is that Mr. Spitzer predicts he will gradually rebuild his poll numbers, which cratered last year, so that by the time 2010 rolls around, he'll be strong enough to deter a restive Andrew Cuomo from challenging him.

"I dare him," will be the message the governor sends to the attorney general.

In the administration's view, Mr. Spitzer will have secured the Democratic base by pouring a record amount of money into public education, by supporting gay marriage, and by moving the state toward universal health care.

He'll be in a position to appeal to Republicans by taking a tougher stand against tax increases than Mayor Bloomberg did and by keeping budget spending below the average rate set during Governor Pataki's tenure.

One might assume that Mr. Spitzer would have downgraded expectations for himself after his "meltdown," as Vanity Fair described his rookie year.

Mr. Spitzer, however, hasn't lost his confidence or modified his self-regard.

He hasn't thrown out his list of enemies.

And he hasn't smothered his dream of becoming the first Jewish president.

He has instead begun whispering a new pledge: There will be a comeback.

jacob@nysun.com

http://www.nysun.com/article/70654?page_no=1

THE NEW YORK DAILY NEWS POLITICAL BLOG:

Eliot Spitzer is no American president in the making ....

Not so long as the internet and these BLOGS exist ....

Eliot Spitzer is a smarmy politician on the make who is on his way back to political obscurity ....

And that MADE-FOR-THE-INTERNET DOCU-DRAMA is being told on internet web sites all across the country ....

And around the world .....

Even as we speak in here ...

And so ....

Say GOOD-BYE to presidential politics, Eliot .....

At least so long as American combat veterans have a say in the matter .....

AND WE DO, Eliot ....

We just keep spreading the news ....

On the veteran's internet grapevine ...

ELIOT SPITZER IS BAD FOR AMERICA ....

ELIOT SPITZER HAS NO INTEGRITY ...

ELIOT SPITZER @#$%$# A DISABLED VETERAN IN UPSTATE NEW YORK TO DENY HIM A VOICE IN OUR GOVERNMENT IN ORDER TO PROTECT FRAUD AND CORRUPTION IN OUR GOVERNMENT!

And God bless America for giving us our voices ....

And God bless the internet for carrying them across this land ...

Try to shut down our voices in here, Eliot ....

Like you did out there in the real world ....

See if you can do it, dude ...

We're waiting!

Soooo ...

Hey, Eliot, dude ....

Bring it on, what say!

And so ...

Posted by John Galt on February 5, 2008 3:34 PM

http://www.nydailynews.com/blogs/supertues...itzer-2016.html

"Plan to link tax breaks to income - Lawmakers propose 'circuit breaker' that gives rebates to those who need it most"

By RICK KARLIN, Capitol bureau, Albany, New York Times Union

First published: Tuesday, February 5, 2008

ALBANY -- A bipartisan group of lawmakers unveiled a plan Monday to link property tax breaks to household income, which would potentially provide fewer people with checks but give tax breaks to those most in need.

The "Middle Income Circuit Breaker" proposal, led by Sen. Betty Little, R-Queensbury, and Assemblywoman Sandra Galef, D-Ossining, would retain the $250,000 income limit that currently applies to School Tax Relief program rebates.

But rather than sending homeowners a rebate check based on their STAR savings, the circuit breaker would base it on their state income tax bills.

If it were to pass this year, New Yorkers could conceivably receive the rebates in April 2009, when their income taxes are due, lawmakers said.

"It is wrong that someone should be taxed out of their home because their income has not kept pace with their property taxes," said Little.

"Our legislation would create a fairer system."

The proposal is similar to Gov. Eliot Spitzer's Middle Class STAR rebate, which also has a $250,000 income cap and uses income tax brackets.

An upstate family with adjusted gross income of $90,000 or less, for example, would get a rebate if its total property tax bill was more than 6 percent of its income.

In that case, the family would get a credit of 70 percent of the overage.

In the costlier New York City area, the rebate would start with incomes of $120,000 or lower.

For households earning between $90,001 to $150,000, the tax bill would have to be in excess of 7 percent of income; for $150,001 to $250,0000, it would have to be over 8 percent.

People would also be required to have lived in their homes for five years.

This would give the biggest breaks to families whose property taxes are a bigger share of their earnings.

While some 2 million people now qualify for STAR rebates, about 1 million would qualify under this plan, said Frank Mauro, executive director of Fiscal Policy Institute, a labor-backed think tank that supports the idea.

Jeffrey Gordon, a spokesman for the governor's budget office, said he had not examined the proposal and could not comment on it.

Rick Karlin can be reached at 454-5758 or by e-mail at rkarlin@timesunion.com.

"Hedge fund settles with NY, SEC for $40M in trading case"

By MICHAEL VIRTANEN, Associated Press

Last updated: 1:32 p.m., Tuesday, February 5, 2008

ALBANY -- Hedge fund Ritchie Capital has settled investigations into late trading in 2001-2003 for $40 million, New York and federal regulators and the company said Tuesday.

Under the agreement, Ritchie Multi-Strategy Global Trading Ltd. will pay $30 million of "disgorgement" and $7.44 million in interest, which will be distributed to affected mutual funds.

Ritchie Capital Management LLC, the fund's investment manager, agreed to pay a $2.5 million penalty.

"This agreement ensures that wrongdoers are held responsible, appropriate reforms are adopted, securities laws are honored and long-term investors are assured a level playing field," said New York Attorney General Andrew Cuomo, whose office investigated the case along with the federal Securities and Exchange Commission.

Ritchie Capital Management separately agreed to adopt reforms, he said.

The investigation showed that from 2001 through 2003, Ritchie Capital -- in concert with certain broker dealers such as Trautman Wasserman, CIBC Oppenheimer, Bear Stearns and Prudential -- engaged in late trading, buying and selling mutual fund shares after the 4 p.m. close of the markets, Cuomo said.

The company sold mutual funds at pre-close prices based on post-close information, using a complicated model to predict how the market would react on the next trading day, he said.

The SEC said that resulted in a profit of approximately $30 million.

Cuomo said Ritchie Capital and broker-dealers concealed late trading and manipulated time-stamped trade sheets to show transactions were done before the closing.

Under the settlement, the fund and investment manager neither admitted nor denied the investigators' findings.

"We are pleased to put this matter behind us, and we will continue our other efforts to maximize value for all of our investors," Thane Ritchie, CEO of Lisle, Ill.-based Ritchie Capital, said in a prepared statement.

The SEC order also named Thane Ritchie and two employees.

"This action demonstrates the Commission's willingness to take strong action against hedge fund advisers and their employees when they violate the federal securities laws," said Linda Chatman Thomsen, director of the SEC's Division of Enforcement.

THIS ARTICLE IS INSERTED HERE FOR BACKGROUND

THE FINANCIAL TIMES

"Banks pressed to bail-out bond insurers"

By Ben White, Aline van Duyn and Francesco Guerrera in New York

Published: January 23 2008 20:25 | Last updated: January 24 2008 00:45

Leading US banks are under pressure from New York state’s insurance regulator to provide as much as $15bn to support struggling bond insurers, people familiar with the matter said on Wednesday night.

Eric Dinallo, New York insurance superintendent, held a two-hour meeting with bank executives on Wednesday and urged them to provide as much as $5bn in initial capital to support the insurers – the largest of which are MBIA and Ambac – and ultimately to commit up to $15bn.

There is widespread concern that rating agency downgrades of the specialist insurers known as monolines could force a fresh round of writedowns by banks, which could damage already battered investor confidence.

This has led to speculation that banks would band together to prop up the insurers, which guarantee payments on thousands of ­billions of dollars worth of bonds issued by municipal governments and other borrowers.

A spokesman for Mr Dinallo had no comment on details of the meeting.

People familiar with the matter said the specifics of a possible capital infusion had yet to be decided, but contributions would not necessarily be based on how much exposure each bank has to bond insurers.

Some participants in the meeting described the discussions as at an early stage.

Wall St rebounds on talk of credit rescue

Mr Dinallo’s effort has not met with uniform support among the banks, which in some cases have their own capital-raising needs following the collapse in value of mortgage-related securities on their books.

The banks also still feel stung after a failed bail-out plan backed by the US Treasury under which they would have bought assets from structured investment vehicles, known as SIVs.

Wilbur Ross, the US financier who specialises in distressed businesses, said he was seriously considering buying a stake in a monoline and would make a decision on which company to back “soon”.

He expressed scepticism that Mr Dinallo would be able to persuade banks to provide the funds.

“I think it’s good that the New York insurance superintendent is coming with proactive and creative ideas for the industry but I am not so sure that he can do much to persuade banks to provide capital [to the insurers],” Mr Ross told the Financial Times.

News of a possible bail-out sent share prices for both Ambac and MBIA soaring, making any potential investments more expensive.

Ambac shares rose 71.9 per cent to $13.70 while MBIA rose 32.6 per cent to $16.61.

Concerns about the future of MBIA and Ambac grew last week when Fitch Ratings downgraded Ambac from triple-A to double-A.

The business model of both companies depends on a top-level credit rating.

Banks such as Merrill Lynch, Citigroup and others have been forced to writedown the value of insurance for mortgage-backed securities that they own.

XL Capital, the Bermuda insurer, on Wednesday night said it expects a net loss in the fourth quarter of $1.0bn-$1.2bn, blaming charges connected to its investment in Security Capital Assurance.

The Federal Reserve, the Treasury and the Securities and Exchange Commission have set up at a joint group to examine risks to the financial system that might arise from problems at the bond insurers.

Federal officials were understood to be monitoring the discussions between the New York regulators and the banks.

However, they were not thought to be actively involved.

Unlike banking, insurance is largely regulated in the US by the states.

Mr Dinallo became well known on Wall Street this decade when he worked with Eliot Spitzer, then the New York attorney-general, on an investigation into conflicts of interest in research by investment banks.

Mr Spitzer has since been elected governor of New York and appointed Mr Dinallo to his current position.

Additional reporting by Saskia Scholtes in New York

http://www.ft.com/cms/s/0/107a1c0c-c9eb-11...0077b07658.html

THIS ARTICLE IS INSERTED HERE FOR BACKGROUND

THE FINANCIAL TIMES

"Regulator offers hope for bond insurers"

By Aline van Duyn, Saskia Scholtes and Gillian Tett

Published: January 23 2008 22:11 | Last updated: January 23 2008 22:11

Hopes of a rescue effort is buoying sentiment in at least one corner of the equity market, with investors hoping that saviours will emerge for the hard-hit US bond insurers.

These monoline insurers, the biggest of which are MBIA and Ambac, are hanging on to their crucial triple-A credit ratings by a thread.

Yet share prices for both Ambac and MBIA rose on Wednesday by 70 per cent and 30 per cent respectively on rising expectations of a capital injection.

The largest US banks are under pressure from New York State insurance regulators to provide as much as $15bn in fresh capital to support struggling bond insurers, people familiar with the matter said.

Eric Dinallo, New York insurance superintendent, on Wednesday met executives at the banks and has strongly urged them to provide $5bn in immediate capital to support the bond insurers and to ultimately commit up to $15bn.

Regulators in the US have worked round the clock to find some way of getting the monolines to patch up their capital bases after they miscalculated the risks associated with insuring payments on bonds backed by risky mortgage loans.

New York State’s insurance regulator has tried to lead the efforts, and on Tuesday said it was “engaged with insurers, banks, financial advisers, credit rating agencies, other regulators and government officials, and other stakeholders in examining and developing measures to help stabilise the market.”

Ambac said on Tuesday it was seeing “strong interest” from a “number of potential parties” about capital infusions.

MBIA, which recently secured $1bn from private equity group Warburg Pincus and is working on other deals, is due to report its earnings next week.

One of the concerns is that, even if Ambac and MBIA raise sufficient capital to prevent imminent downgrades, they will again be short of sufficient funds in a few months.

Rating agencies continue to shift their requirements as the extent of risks and exposures have come to light and as the way risks are measured have changed.

Karen Shaw Petrou, managing partner at Federal Financial Analytics, a Washington-based financial consultancy, says part of the challenge was calculating exactly how much capital was needed to support the triple-A rating.

“The key is not what the reality is, but what the rating agencies say it is,” she says.

“Now that the rating agencies are in a game of non-stop revision of their models, the monolines have been left chasing their tails to try to keep the triple-A.”

The loss of their top-notch ratings, apart from threatening their ability to guarantee billions of dollars of payments on bonds by municipal and other borrowers, could feed through to further losses at banks exposed to complex bonds guaranteed by the bond insurers.

Already, exposure to collateralised debt obligations has resulted in tens of billions of dollars of writedowns at banks across the globe.

“The guarantee [from bond insurers] has allowed banks not to write down the value of these positions,” said analysts at UBS.

“If monolines fail, the guarantee is worth nothing and these assets have to be written down."

"This is the latest development for the mortgage crisis and is another negative for banks.”

Concerns about the health of bond insurers was one of the triggers for the sharp collapse in the value of equity markets round the world in recent days.

Reflecting the severity of the fate of monoline insurers, the issue has become a key debating topic at the World Economic Forum in Davos, Switzerland.

This marks an extraordinary turnabout from previous years when the issue was considered to be far too specialist to command any wider attention.

In particular, a series of policymakers and officials from the financial world have stressed that the problems in the monolines are a critical issue weighing on market sentiment – and warned that sentiment in the financial markets was unlikely to improve until there were signs of stabilisation in this sector.

However, there is limited consensus about what steps can be taken to fix the issue – given that many policymakers remain uneasy about backing any state bail-out.

George Soros, the billionaire investor, on Wednesday told the Financial Times:

“I don’t think it would be feasible for the US government to organise a bail-out of the monolines right now because it would be an open-ended obligation."

"But I do think the US and European authorities must ensure the major market makers are able to meet their counterparty obligations."

"Until you do that, the banking crisis will last."

"The authorities have to remove this counterparty risk.”

David McCormick, US undersecretary for the Treasury, on Wednesday refused to comment on whether the US government would be willing to organise a bail-out.

Ms Petrou says a state-sponsored bail-out would be impossible anyway.

“There is no way to do that under US law, absent a private sector rescue backed by a ‘wink and a nod’ of the relevant regulators,” she says.

Even when the US government wants to push through a bail-out, it does not always work.

The US Treasury’s recent attempt to curb losses from off-balance sheet liabilities that banks held through structured investment vehicles (SIVs) ran aground as it failed to attract enough private sector support.

Instead, banks had to bring these SIVs back on to their balance sheets, taking writedowns in the process.

While the government seems unlikely to pump money into the sector and with many banks themselves struggling to raise new capital to cover holes in their balance sheets, other potential private sector investors include private equity and sovereign wealth funds as well as billionaires such as Wilbur Ross and Warren Buffett.

Already, Mr Buffett is starting up a new bond insurer after New York regulators fast-tracked his licence to start business.

Insurers, like most of the world’s big banks and investors, underestimated the risks associated with complex bonds backed by assets such as mortgages.

When the level of foreclosures on risky mortgages rose sharply last year, it fed through to higher than expected defaults on CDOs.

Analysts at RBS estimate that triple-A rated monoline insurers guarantee $305bn of US CDOs and $88bn of non-US CDOs.

Concerns about rating downgrades come as a smaller bond insurer, ACA Capital, faces insolvency after being downgraded to junk bond status last year, leading to huge write-offs.

Already, Fitch has taken Ambac’s triple-A rating away from it.

Moody’s and Standard & Poor’s are widely expected to follow unless significant amounts of fresh capital is raised soon.

Additional reporting by Paul J Davies in London and Jeremy Grant in Washington

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"Realities of monoline rescue attempt sink in"

By Aline van Duyn, Saskia Scholtes and Michael Mackenzie

Published: January 24 2008 22:08 | Last updated: January 24 2008 22:08

In spite of a welcome ray of hope in the form of regulatory efforts to push for a potential cash injection from banks, sentiment in the bond insurance industry was once again clouded on Thursday by a realisation that a solution might not be imminent.

Hopes that banks might cough up some cash to plug holes left in the balance sheets of bond insurers such as Ambac and MBIA, which miscalculated the risks associated with assets backed by subprime mortgages, pushed their shares up sharply on Wednesday.

On Thursday, however, the euphoria subsided somewhat, not least because there was still a lot of detail to be ironed out and it was far from clear how many banks would back such a scheme.

Ambac’s shares fell 6.8 per cent by midday in New York to $12.77 and MBIA’s shares fell 13.2 per cent to $14.42.

Eric Dinallo, the New York State Insurance Superintendent who held talks with banks on Wednesday and has urged them to come up with as much as $15bn of cash for the bond insurers, made it clear no plan was ready to be announced.

“Clearly it is important to resolve issues related to the bond insurers as soon as possible,” said Mr Dinallo in a statement on Thursday.

“However, it must be understood that these are complicated issues involving a number of parties and any effective plan will take some time to finalise.”

As the behind-the-scenes discussions continued on Thursday, and as bond insurers also continued to talk to potential equity investors such as private equity firms, another bond insurer lost its coveted triple-A rating.

Security Capital Assurance ditched its plans to raise $2bn in fresh capital, leading Fitch Ratings to slash its triple-A credit rating to single-A.

This is not likely to be the end of the story – Fitch warned it may cut the ratings further.

SCA’s shares were down 26.7 per cent at $2.78.

“[This] reflects the significant uncertainty with respect to the company’s franchise, business model and strategic direction; uncertain capital markets; the company’s future capital strategy; ultimate loss levels in its insured portfolio; and the challenges in the [bond insurer] market overall,” Fitch said.

Fitch, which has taken a more negative stance on the ratings of bond insurers than rivals Moody’s Investors Service and Standard & Poor’s, was clearly not anticipating an imminent cash shot from banks.

The downgrade of SCA follows a cut of Ambac’s rating to AA by Fitch last week.

The worry is that other rating agencies may follow suit, and that the widespread loss of triple-A credit ratings could lead to losses for banks and other financial institutions with exposure to some of the over $2,000bn of debt guaranteed by bond insurers or hedges in which they are counterparties.

A bail-out could reduce these concerns, which have been hanging over the entire equity market.

News of the talks about a capital infusion led to a powerful rebound for US stocks on Wednesday after a five-day losing run and on Thursday helped power the biggest gains in European stocks for almost five years.

“It would remove a lot of counterparty concerns that are hurting the financials,” said Doug Peta, strategist at J&W Seligman.

Some analysts said it was too early to say whether such a plan to bail out the monolines was feasible.

“Scepticism about a bail-out lies along three lines: whether the banks can overcome competing interests, whether the banks can actually afford the $15bn, whether the $15bn is enough,” said TJ Marta, fixed income strategist at RBC Capital Markets.

Some analysts speculated that the banks might be forced then to raise additional capital, such as from sovereign wealth funds, given the constraints on their capital.

The problems for bond insurers, of which MBIA and Ambac are the largest, stems from their move into structured finance.

Historically, bond insurers have guaranteed payments on debt borrowed by municipalities in the US.

By allowing lower-rated entities to essentially piggy-back on the insurers’ triple-A credit ratings, for a fee, municipalities were able to sell their bonds to investors who only wanted top ratings.

Structured finance, which includes guaranteeing payments on bonds backed by other debt, some of it in turn backed by assets such as mortgages, has turned out to be riskier than their traditional municipal business, with higher rates of default.

The scale of losses associated with such collateralised debt obligations (CDOs) is still not clear, and estimates have continued to rise in recent weeks.

This has led to shortfalls in capital needed to preserve triple-A credit ratings, and a crisis in confidence which has made it made it hard for MBIA and Ambac to get new business.

In a back of the envelope calculation, Geraud Charpin, analyst at UBS, said that a downgrade from triple-A to double-A would lead to an extra $10bn of higher counterparty risk at banks.

Mr Charpin based this on the assumption that the insurers guaranteed about $2,200bn of debt, of which probably around $1,000bn is non- municipal debt.

“Of course, the writedown would be heavier in case of a complete failure [which would void the guarantee and force a full mark-to-market pricing of the securities],” Mr Charpin said.

“At this stage we are not sure who already made appropriate – preventive – writedowns and who did not."

"It is possible the overhang of additional writedowns in bank books was overestimated by the market.”

Working out answers to these questions is now key, but not easy.

One of the problems is that the level of losses associated with mortgage-backed assets is not yet known.

Many analysts are now factoring in worst-case scenarios in terms of losses – a few weeks ago many only ascribed a low chance of that being the case.

Nigel Myer, analyst at Dresdner, said investment banks might be prompted to back a bail-out if they believe losses could be worse than currently expected.

“If structured finance valuations can be maintained and that market kept open, the cost of injecting new capital may be less than the writedowns that would otherwise be incurred should a [bond insurer] fall below double-A, which we believe to be a critical threshold,” he said.

“Could a sweetheart deal within the industry work – we think it could, but the odds are against it because the incentive for each player is to stay out while others take part.”

Additional reporting by Stacy-Marie Ishmael

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"Money market funds wait to see where the buck will stop"

By Saskia Scholtes in New York and Gillian Tett in Davos

Published: January 24 2008 22:44 | Last updated: January 24 2008 22:44

Uncertainty over the fate of the embattled bond insurance industry has in recent months caused some sleepless nights for US money market fund managers.

For decades, money market funds have bought municipal bonds and, more recently, structured finance securities that have been insured by companies such as MBIA, Ambac, FGIC and SCA.

But these investors are increasingly concerned that the insurance may not provide the comfort it once did as the bond insurers face losing their crucial triple-A ratings after losses on mortgage bonds they have insured.

Ambac and SCA have both been downgraded below triple-A by Fitch Ratings in the past week and further downgrades are thought likely.

“The potential problem of the money market funds is what is really scaring people now,” said one senior investment banker on Thursday.

Money market funds are the sacred cow of the US fund management industry, designed to be the safest possible place for investors to park their money.

They pledge never to “break the buck”, meaning that they promise to maintain the value of every dollar invested.

To keep that promise and to ensure that they can redeem investors’ cash whenever needed, money market funds often demand that underwriters agree to buy securities back if needed.

The critical issue now is that investment banks typically only agree to repurchase these assets on the condition that a certain level of ratings is maintained.

However, if the insurers lose their triple-A ratings, the $2,400bn of securities they have insured will also be downgraded.

This could force some money market fund managers to sell to comply with strict investment guidelines, which could in turn force prices on insured securities to distressed levels.

For money market fund managers, if there is any risk that the price of a security might fall, they must sell.

Similarly, if they see the value of their existing investments decline, they may need to seek a bail-out from their bank sponsors, which could create further pressure on their balance sheets, or face a widespread loss of investor confidence.

The potential scale of the problem has added a sense of urgency to the regulators’ concerns about the bond insurance industry, and has helped to drive efforts to co-ordinate a rescue plan.

On Wednesday, the New York State insurance regulator held talks with banks and pressed them to provide up to $15bn of capital to support the ailing industry.

One senior regulator said on Thursday:

“In the old days, what we had to worry about was the idea of runs on banks in terms of retail deposits."

"But there is a prospect that we could see a run centred around the money market funds of the type we have not seen before – this is generating a lot of concern.”

If there were widespread losses in money market funds, policymakers fear the political heat will ratchet up as retail investors start screaming and, worse, it could precipitate a widespread withdrawal of cash from money market funds, which could cripple the entire short-term funding market.

For their part, portfolio managers at money market funds are taking precautions.

“The bond insurers are absolutely a pressing concern,” said Steven Shachat, a money market fund manager at Alpine Woods Capital Investors.

“We have sold out of all our positions in bonds wrapped by MBIA, FGIC, Ambac and SCA – we just don’t want to take that risk.”

The wave of selling from Mr Shachat and other such investors has already pushed prices for insured securities much lower than those for comparable uninsured securities.

Mr Shachat says this has created a “two-tiered market” in which yields for insured securities are up to 350 basis points higher than those for uninsured securities – in a dramatic reversal of conventional pricing.

Thus the fear for investors and policymakers is that downgrades of the bond insurers could set off a further panicky wave of selling by money market funds.

George Soros said in Davos this week:

“There is growing concern about monolines . . . there is also a potential problem with money market funds which could be holding doubtful assets.”

Investors have not lost money on a US money market fund since 1994 and it is unlikely any fund operator now would allow such an event to occur.

Last year, several money market fund sponsors were forced to bail out funds that had suffered losses on investments related to subprime mortgages.

The tally of US money market and cash fund bail-outs hit more than $4bn last year as parent companies stepped in to prevent their funds from “breaking the buck”, or falling below the $1 a share value.

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"Banks seek value in monoline rescue plan"

By Paul J Davies

Published: January 28 2008 20:56 | Last updated: January 28 2008 20:56

With the New York insurance regulator pushing for a deal to bail out the bond insurers, or monolines, the banks approached to stump up the cash will be working hard to see where value lies for them.

It is understood that Eric Dinallo, the New York insurance superintendent, is pushing for $10bn-$15bn to prop up the troubled sector.

Some analysts and bankers believe that figure is too high.

Compared with Merrill Lynch’s $3.1bn write-offs linked to monoline hedges, $15bn from all banks may look fairly small, but Merrilll’s contracts were mostly with ACA Capital, the bond insurer closest to insolvency.

Writedowns from ratings downgrades to other monolines would not be half as painful, bankers insist.

Geraud Charpin, analyst at UBS, believes an industry-wide downgrade from AAA to AA would lead to $10bn in total writedowns at the most for banks on monoline-guaranteed structured bonds such as mortgage-backed debt.

Standard & Poor’s said this month it expected total after-tax losses for the monoline industry from mortgage-backed bonds and the more complex collateralised debt obligations to be $13.6bn.

S&P’s assessment could worsen, particularly since its estimates of losses had grown by 20 per cent, or almost $2.5bn, since its previous examination in mid-December.

S&P said this growth was not significant in terms of individual companies’ capital strengthening plans.

A number of monolines have talked about raising $1bn-$2bn of new capital, which across the eight or nine most important groups leads to the proposed $10bn-$15bn.

Some see this figure as inadequate.

Independent Strategy, a London-based research house, believes closer to $140bn is needed.

But this includes higher loss estimates of $73bn and an increase in the ratio of claims paying resources to total insured liabilities from about 2 per cent to 5 per cent.

The average ratio of monoline equity to total net exposure is a shade under 1 per cent, so a new vehicle operating on a similar basis would need more than $21bn to take on the full $2,400bn in existing industry liabilities.

Banks could ask how much might be needed to set up a vehicle to take out the most toxic exposures.

UBS estimates those to amount to about $130.7bn for the six biggest companies, suggesting a starting point for equity of only about $1.3bn.

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"Fed quiet on bond insurers rescue"

By Gillian Tett, Saskia Scholtes and Krishna Guha

Published: January 28 2008 20:56 | Last updated: January 28 2008 20:56

In autumn 1998 when hedge fund Long-Term Capital Management was imploding, William McDonough, then president of the New York Federal Reserve, pulled the heads of Wall Street banks into an oak-panelled Fed meeting room – and bullied them into organising a collective bail-out.

The meeting is renowned since it quelled the LTCM storm.

With Wall Street now facing the threat of a new financial calamity – this time from the embattled bond insurers – some bankers are wondering if the Fed could repeat its trick.

In public, at least, it would seem not.

In recent days, it has been Eric Dinallo, New York Superintendent of Insurance, who has spearheaded efforts to cut a deal, by approaching 13 large investment banks and issuing public statements on the matter.

By contrast, the New York Fed, and its president, Tim Geithner, have been notably silent, avoiding comment on the issue altogether.

This stance is partly because official responsibility for overseeing the bond insurers rests with the state insurance regulators, not the Fed.

Thus the insurance regulator from Wisconsin, which regulates Ambac, one of the two biggest bond insurers, also took part in the meeting with banks.

Bankers believe the Fed also wants to avoid derailing private sector efforts to resolve the crisis, either by stepping in too early or forcefully.

“LTCM means everyone is now looking to the Fed but the Fed does not want to give the impression that it will just sort things out,” says one former US official, who points out that the “impetus must come from the private sector”.

But there is little doubt that many Wall Street bankers fervently hope the Fed will become involved.

Mr Geithner commands considerable credibility on Wall Street.

Mr Dinallo, by contrast, invokes more mixed emotions among some bankers because of his previous involvement in enforcement actions.

“This . . . should be organised at a Federal level, not by state regulators,” a senior official at one Wall Street bank claimed in Davos last week.

Bankers involved in the monoline discussions say that, while the Fed initially hung back, it is now an active player in the discussions, albeit discretely.

“The Fed is absolutely involved now,” says one policymaker.

Thus far, these talks have not produced any tangible deal, partly because it is, arguably, harder to forge a consensus on the bond insurers than it was to resolve the LTCM saga.

One complicating factor is that there are several bond insurers involved rather than just one hedge fund.

Another problem is that banks have wildly varying levels of exposures, giving them different incentives to participate.

What might, possibly, make it possible to cut a deal is that bankers agree that there could be very damaging implications if bond insurers actually lose their crucial triple-A ratings.

Ambac and SCA have already lost their triple-A stamp from Fitch.

Further downgrades at the monolines are possible as a result of losses on subprime mortgage bonds they have insured.

Meanwhile shortfalls in capital and a crisis of confidence have made it hard for the bond insurers to get new business.

If these downgrades occur, it would cause direct pain for some banks, forcing them to write down their counterparty exposures to the downgraded insurers.

Worse still, it could unleash wider financial turbulence in sectors such as money market funds, which have been heavy buyers of insured securities.

Given this, some officials say there is now a clear financial incentive for some banks to participate since the costs created by a downgrade for the bond insurers would probably top the cost of a bail-out.

Moreover, if a rescue plan simply entails that banks provide back-up liquidity lines to banks rather than direct capital injections into the monolines – as some are suggesting – that could make it more palatable.

The really crucial issue is not simply whether a deal can be done but whether it can be concluded before rating agency downgrades or any money market fund panic.

Nobody, in other words, is ready to declare a LTCM-style victory yet.

“A deal makes sense . . . but it’s not done yet,” says one regulator.

“This is a race against time.”

Report bv Gillian Tett, Saskia Scholtes and Krishna Guha

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"US bond insurer rescue takes shape"

By Aline van Duyn, Saskia Scholtes and Ben White in New York and Gillian Tett in London

Published: January 28 2008 20:56 | Last updated: January 28 2008 20:56

Efforts to shore up US bond insurers gathered pace on Monday as New York state regulators appointed investment bankers to advise on a rescue plan that could include back-up credit lines for the troubled guarantors.

The efforts are being spearheaded by Eric Dinallo, the New York state insurance superintendent, who is being privately supported by the New York Federal Reserve Bank and other regulators, people familiar with the matter said.

Perella Weinberg, an advisory firm based in New York, has been hired as a financial adviser by Mr Dinallo’s department.

The company is led by Joseph Perella, the former Morgan Stanley mergers and acquisitions executive, and Peter Weinberg, who previously ran Goldman Sachs’s European business.

The discussions on a rescue plan are understood to be proceeding on two tracks.

Regulators are talking to banks about providing back-up credit lines for the bond insurers.

They are also speaking with other parties, including private equity firms and billionaire investors like Wilbur Ross and Warren Buffett, about providing fresh equity capital for insurers such as Ambac and MBIA.

Mr Dinallo met about a dozen banks last week, asking them to provide up to $15bn for the bond insurers.

Mr Weinberg said:

“Both at the meeting last Wednesday and since that time, the [insurance] department has been promoting a broad range of solutions that protect policy holders.”

He added that these included both the provision of credit lines by banks and separate moves to shore up the capital bases of the insurers.

While there was no indication that any banks had agreed yet, credit lines could help the insurers stave off credit rating downgrades.

Some bankers hope the discreet involvement of the Fed will give the initiative greater momentum, because of its influence on Wall Street.

The Fed has, for example, been discreetly urging big US banks to shore up their capital bases – with considerable success.

The rescue efforts come amid concerns that bond insurers are running out of time to reassure rating agencies they have enough capital to deal with losses related to guarantees of bonds exposed to subprime mortgages.

Debt markets are pricing in the likelihood that bond insurers will lose their triple-A status – in sharp contrast to the stock markets, which rallied sharply last week after news of a potential bail-out emerged.

The withdrawal of the triple-A ratings could lead to losses for banks, some of which have large exposures to hedges, derivatives contracts and bonds whose value depends on the insurers maintaining the highest credit rating.

Banks have already written off more than $100bn of exposures related to subprime mortgages.

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"US bond insurers expected to fall further"

By Aline van Duyn and Saskia Scholtes in New York

Published: January 29 2008 21:13 | Last updated: January 29 2008 21:13

Large numbers of investors are continuing to ‘short’ shares in Ambac and MBIA, the two biggest US bond insurers, suggesting expectations of further share price falls despite growing efforts by regulators to push through a rescue plan for the sector.

According to Data Explorers, which tracks short selling, the percentage of shares on loan relative to the market capitalisation of Ambac stood at 40 per cent last Thursday.

For MBIA, the proportion was 39 per cent.

Efforts to shore up US bond insurers gathered pace this week as New York state regulators appointed investment bankers to advise on a rescue plan that could include back-up credit lines.

Perella Weinberg, an advisory firm based in New York, has been hired as a financial adviser by the New York state insurance superintendent department.

Regulators are talking to banks about providing back-up credit lines for the bond insurers.

In addition, they are talking to other parties, including private equity firms and billionaire investors such as Wilbur Ross and Warren Buffett, about providing fresh equity capital for insurers such as Ambac and MBIA.

The rescue efforts come amid concerns that bond insurers are running out of time to reassure rating agencies that they have enough capital to deal with losses related to guarantees of bonds exposed to subprime mortgages.

Debt markets are pricing in the likelihood that bond insurers will lose their triple-A status.

Those going short include Bill Ackman, head of Pershing Square Capital Management LP, a New York hedge fund that has been betting heavily for years against bond insurers.

Current short levels are below the highest proportion of borrowed shares reached at the beginning of January for the bond insurers.

However, they still represent a very high level of borrowing.

Even in other cases where shares have been shorted, such as those of UK bank Northern Rock last year, the proportion of shares on loan to market capitalisation rarely reaches the levels on Ambac and MBIA.

Data Explorers said that Northern Rock’s borrowed shares peaked at about 22 per cent of market capitalisation in September of last year.

The threat of further downgrades for the bond insurers has sparked concerns about the broader fallout for holders of insured bonds, particularly municipal money market funds.

”Over the last eight weeks, money market fund managers have been looking to reduce risk and their exposure to insured bond programs, and they have been exercising their right to put these back to the brokers,” said Said Rafat, managing director at Fitch Ratings.

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"Thain says bond insurers bail-out unlikely"

By Ben White and Aline van Duyn in New York

Published: January 30 2008 23:36 | Last updated: January 31 2008 02:08

John Thain, Merrill Lynch’s new chief executive, said he expected individual credit insurers would receive capital infusions from investors, but that it would be difficult to craft an “industry-wide” bail-out for the beleaguered guarantors.

Mr Thain said an effort by New York state regulators to help leading bond insurers maintain their credit ratings was raising interest in the sector on the part of investors including private equity groups and specialists in distressed companies.

However, he said in an interview with the Financial Times on Wednesday that getting banks to agree on a single approach was unlikely because they have different exposures to the credit insurers and varying opinions on what should be done.

“I think that’s very hard to get a transaction put together across the whole industry."

"I think it’s more likely you’ll have a company by company solution,” Mr Thain said.

Uncertainty about whether leading bond insurers will be able to retain their triple-A credit ratings hit the stock market on Wednesday, with shares of Ambac and MBIA, the two largest insurers, falling 16 per cent and 13 per cent, respectively.

Highlighting the pressure on bond insurers, Fitch, a credit rating agency that has already cut Ambac’s triple-A rating, on Wednesday slashed the triple-A rating of FGIC, another bond insurer.

Eric Dinallo, New York state insurance superintendent, last week held a meeting with leading banks to urge them to provide up to $15bn for credit insurers.

Discussions have since focused on two possible sources of support – direct investments and back-up credit lines provided by banks.

Moody’s Investors Service and Standard & Poor’s, the biggest credit rating agencies, have so far maintained their triple-A credit ratings for Ambac and MBIA, although they have warned that these could be cut.

Such a move could force banks to take significant writedowns on securities and hedges that rely on the insurers’ triple-A credit ratings.

Merrill already has taken writedowns on its exposure to bond insurers, including those still rated triple-A.

The New York regulators are in daily contact with the rating agencies to reassure them that talks about potential capital infusions are continuing.

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"Banks link to solve bond insurers crisis"

By David Wighton, Aline van Duyn and Henny Sender in New York and Peter Thal Larsen in London

Published: February 1 2008 19:53 | Last updated: February 2 2008 02:49

US and European banks are joining forces to try to solve the crisis among US bond insurers that could exacerbate the impact of the credit squeeze.

One group, including Citigroup and Barclays, is examining options for supporting Ambac Financial, the bond insurer.

Separate teams are working with other bond insurers, according to people close to the process.

The moves come after efforts by Eric Dinallo, New York state insurance superintendent, to persuade the banks to back an industry-wide bail-out.

John Thain, chief executive of Merrill Lynch, said such a solution would be “hard to get” given banks’ different exposures to the credit insurers.

But Mr Dinallo has spurred the banks to look support on an individual basis.

Moody’s Investors Service and Standard & Poor’s, the credit rating agencies, say they might cut the Triple-A ratings of Ambac and MBIA, forcing banks to make further writedowns or provide more capital against investments insured by the guarantors.

The group looking at supporting Ambac includes Citigroup, Wachovia, Barclays, Royal Bank of Scotland, Société Générale, BNP Paribas, UBS and Dresdner.

The members of the group, which is being advised by Greenhill, were understood to be the banks most exposed to the insurer.

Credit Suisse is advising Ambac.

Ambac, which has lost its Triple-A rating by Fitch, needs to raise at least $1bn, analysts say.

Ambac shares rose 13.4 per cent on Friday to $13.20, and MBIA rose 5.55 per cent to $16.36.

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"‘Vultures’ circle companies at bargain prices"

By Francesco Guerrera in New York

Published: January 31 2008 22:04 | Last updated: January 31 2008 22:04

Cash-rich financiers including Warren Buffett, Wilbur Ross and Ron Perelman are preparing to pounce on US companies hit by the financial turmoil – moves that could herald a new era of “vulture investing”.

After years pushed to the sidelines by high valuations and fierce competition from private equity, so-called “value” investors believe the financial and capital market crisis now offers a great opportunity to buy companies at bargain prices.

Mr Ross, who is considering either buying into one of the troubled monoline insurers, which insure against bond defaults – or setting up a new one – told the Financial Times the turmoil provided an embarrassment of riches.

“Nowadays so many things are starting to come unglued that the real problem is sorting out what the real opportunities are,” he said.

In a recent note to clients, the credit rating agency Standard & Poor’s said that, as the number of ailing companies in sectors ranging from brokerage and banking to media and consumer products grows, “vultures begin to stir”.

Mr Ross, who has made millions by restructuring troubled companies in out-of-favour industries such as mining and car parts, on Thursday announced the closing of a $4bn fund to “invest in and restructure financially distressed companies”.

He said his next moves were likely to be in insurance, mortgage servicing and car parts.

Mr Buffett, who has been lamenting the lack of takeover targets for several years, has struck deals worth a combined $6bn over the past few months.

But he is widely believed to be still looking to spend the $40bn cash-pile held by Berkshire Hathaway, his conglomerate, on a large financial or industrial company.

“The elephant gun is still out,” said Mohnish Pabrai, a California-based asset manager who owns shares in Berkshire, and follows Mr Buffett closely.

“This is Berkshire’s market."

"When you have this kind of sell-off in equity markets and the capital Berkshire has, things will happen”.

Mr Perelman, who has assembled a collection of businesses ranging from Revlon cosmetics to Allied Barton security services by taking over companies in distress, said he regarded the current conditions as a “buying opportunity”.

“Over the next six months you are going to see very, very unique opportunities,” he said in a video interview with the FT last week.

Analysts said that, aside from well-known investors, several hedge funds and private equity groups have been raising billions of dollars in anticipation of a sharp rise in the volume of distressed assets and companies.

http://www.ft.com/cms/s/0/26e7c1e8-d02f-11...0b5df10621.html

THE WALL STREET JOURNAL

January 23, 2008, 5:35 pm

"I’m Eric Dinallo. I’m Here to Save the World"

Posted by Heidi Moore

New York State Insurance Superintendent Eric Dinallo sure works fast: only days after announcing plans to find investors to save struggling bond insurers like Ambac and MBIA, Dinallo already is holding meetings about how such a plan would work.

Success in creating the financial detente necessary to rescue the bond insurers would be in marked counterpoint to the modus operandi of his old boss, mentor and former state attorney general, Eliot Spitzer, who always seemed more inclined to jail executives than save their companies.

If Dinallo’s plan works, it wouldn’t be the first time he has stepped in to save a troubled financial institution.

Dinallo worked for Spitzer from 1999 to 2003 as head of the AG office’s investor protection bureau and the main point man on Spitzer’s investigations of Wall Street research, late trading and market timing as well as insurance industry kickbacks.

In 2002 Dinallo gained recognition among regulators (and the bankers who dreaded them) for the Dinallo Affidavit, the blow-by-blow account of Wall Street research violations, including those of former Merrill Lynch analyst Henry Blodget.

In 2003, then-Morgan Stanley general counsel Donald Kempf hired Dinallo as the firm’s chief regulatory officer to clean up the firm’s compliance process and fend off future Spitzerian investigations.

By 2006, with that task completed and both Kempf and his boss, Phil Purcell, gone from Morgan Stanley, Dinallo became general counsel for insurer Willis Group Holdings — a Morgan Stanley client and recovering former target of Spitzer’s insurance investigations.

Willis already had settled with Spitzer and other regulators through a $51 million restitution payment to clients.

A person close to a major bond insurer tells Deal Journal that a bailout — or even widespread sales of the bond insurers — would meet with eager interest from private-equity firms looking for undervalued assets and banks with enough enlightened self-interest to prevent a total collapse.

Let us hope so, because if Dinallo’s plan doesn’t work, Wall Street sure wouldn’t want Spitzer to step back in.

–Heidi Moore is U.S. Bureau Chief of Financial News, a Dow Jones & Co. publication and a contributor to Deal Journal.

http://blogs.wsj.com/deals/2008/01/23/im-e...orld/trackback/

"NY employee accused of extorting companies to use historic armory"

By DEEPTI HAJELA, Associated Press

Last updated: 4:23 p.m., Wednesday, February 6, 2008

NEW YORK -- A former superintendent of a landmarked National Guard armory has been indicted on charges of extortion and bribery for demanding thousands of dollars from companies that wanted to use the historic site for events including Marc Jacobs fashion shows, state officials said.

James Jackson, a 30-year employee of the state Division of Military and Naval Affairs, was arraigned Wednesday on a 31-count indictment that charged him with taking cash bribes and material goods, including exercise equipment, from companies in exchange for their use of the 69th Regiment Armory, state Attorney General Andrew Cuomo and Inspector General Kristine Hamann announced at a news conference.

The armory is being used for current Fashion Week events.

Cuomo said the public had the right to pay a fair price for using a state space, which the armory is, and should not accept any attempts at extorting more money.

"You pay the fair value for that space," he said.

"What you don't pay is a gratuity or a bribe or an illegal tip to get you into that space."

Jackson, who resigned from his post shortly after his arrest in October, pleaded not guilty at his arraignment.

His attorney, Alan Abramson, declined to comment.

If convicted, Jackson, 56, could face more than 20 years in prison.

The indictment charged Jackson with taking bribes in connection to Marc Jacobs shows from February 2000 to September 2007 and other trade shows in 2007 and with defrauding the government.

Cuomo said Jackson received more than $30,000.

Cuomo said the bribes for the fashion shows were paid by KCD, a public relations company that the fashion house used.

Neither KCD nor Marc Jacobs was named in the indictment.

The investigation was continuing, though, and Cuomo said the payment of bribes could be a crime depending on the circumstances.

KCD attorney Ken Breen said the company was cooperating with Cuomo's investigation.

In a statement, a Marc Jacobs representative said the fashion house, which is using the armory for shows this Fashion Week, was aware of the charges against the armory superintendent and was cooperating with the state attorney general's office in its investigation.

"We are using the armory for this week's fashion shows with the full knowledge and consent of the attorney general's office," the statement said.

The 69th Regiment Armory, which occupies much of a Manhattan block at 25th Street and Lexington Avenue, was built to serve as a training center and social clubhouse for the National Guard.

It was entered into the State and National Register of Historic Places in 1994 and was listed as a National Historic Landmark two years later.

"Rensselaer County probe fades"

By KENNETH C. CROWE II, Staff writer, Albany, New York Times Union

Last updated: 5:48 p.m., Friday, February 8, 2008

TROY - The term of a Rensselaer County grand jury investigating complaints against the county Democratic chairman for soliciting political donations from patronage appointees expired Friday without any action being taken, according to court records.

County Democratic Chairman Thomas Wade testified before the grand jury in the fall about allegations that he was forcing Democratic employees at the county Board of Elections to make contributions to the county committee.

The grand jury's term was extended in December at the request of Patricia DeAngelis, the former Republican district attorney.

District Attorney Richard McNally, a Democrat, did not request a third term for the grand jury, according to a check of court documents.

"I can't comment at all," McNally said Friday regarding the grand jury's actions.

Wade and his attorney, Brian Premo, said the allegations were groundless.

The Wade case was the sixth politically related complaint made to DeAngelis' office in 2007.

It was the only case in which a special prosecutor was not requested.

Albany County District Attorney David Soares was named as a special prosecutor in April, 2007, to investigate those five complaints.

Heather Orth, a spokeswoman for Soares, said the cases remain open and the office would not comment on them.

Two of the five complaints included allegations by Colleen Regan, a former Rensselaer County Legislature Republican employee, that county employees had to do political work for Victory Lane, a political consulting company owned by Legislature Majority Leader Robert Mirch and Richard Crist, the GOP majority spokesman; and that Regan had to make a political attack advertisement at Troy City Hall for Mirch.

Mirch in turn filed two complaints about Troy Democratic Councilman Clement Campana allegedly making political calls from Hudson Valley Community College and Legislature Minority Leader Virginia O'Brien asking Mirch to assign city crews to clean up a property.

The fifth complaint by Legislature Vice Chairman Richard Salisbury requested an investigation of Susan Steele, the Democratic minority's spokeswoman, taking photos of Crist during a county Legislature meeting that were used in a political mailing.

"Bruno: 'Framework' of deal set for NYRA, race tracks"

By MICHAEL GORMLEY, Associated Press

Last updated: 5:14 p.m., Thursday, February 7, 2008

ALBANY -- State leaders have a "framework of an agreement" that would give the New York Racing Association a $105 million bailout as part of a 25-year franchise to run New York's thoroughbred race tracks, Senate Majority Leader Joseph Bruno said Thursday.

In exchange for the lucrative 25-year franchise, NYRA would drop a claim that it owns the tracks at Aqueduct, Belmont and Saratoga along with some high-priced property around them.

Bruno said the tentative agreement is expected to be final by Feb. 13, when a temporary extension of NYRA's franchise is scheduled to end.

State Operations Director Paul Francis, speaking for Gov. Eliot Spitzer, wouldn't confirm the elements Bruno released as part of the tentative agreement.

But Francis said Bruno's details are "generally consistent" with the closed-door talks that include NYRA officials.

"I don't have any problem with what the senator said," Francis said.

"On the substantive issues, I think we're essentially in the same place."

NYRA spokesman John Lee said the private group remains optimistic and is preparing to hold races on the day after the temporary extension would expire.

The agreement Bruno outlined Thursday includes $105 million in state money to help NYRA out of bankruptcy court and more revenue for purses and breeders.

NYRA's board would also be changed to provide greater oversight of the private group, which has held the franchise since 1955.

Bruno called a news conference a day after NYRA threatened to lay off workers and close Saratoga Race Course -- in Bruno's district -- for this coming season if a deal wasn't reached by next week.

"Can I tell you this is a done deal?"

"No," Bruno told reporters.

"I cannot say that."

But, "Racing will continue," he insisted.

Assembly Speaker Sheldon Silver wouldn't confirm the specific elements that Bruno released, but didn't deny a deal was near.

"We are actively engaged in negotiations and we are working toward resolution by next week's deadline," said Silver spokesman Dan Weiller.

"The speaker is optimistic that we will meet next week's deadline."

According to Bruno, there is general agreement -- subject to further talks -- on the following elements:

-- State taxpayers would bail out NYRA for a third time, this time with $75 million to pay off some of its debt and get out of federal bankruptcy court.

Another $30 million in state money would be used for operating expenses this year.

NYRA would still be about $200 million in debt.

Francis said the bailout would likely be borrowed and paid back with video slot machines revenue.

-- A company to operate video slot machines at Aqueduct would be selected in about a month, with revenue from the machines expected to give NYRA the cash it needs to operate and pay off its debt.

-- No video slot machines would be put at Belmont.

But Francis said the administration will continue to push for Belmont video slot machines.

The 2008-09 state budget is counting on $250 million in revenue from Belmont machines.

-- Saratoga Race Course, the jewel of New York racing, wouldn't be changed.

Local zoning laws would be established to make sure development is in keeping with the historic track, which attracts hundreds of thousands of gamblers and tourists from around the world every summer.

-- The new NYRA board will include six or seven appointees of the governor, including representatives of horse owners and breeders, two appointed by Bruno and two by Silver.

NYRA-appointed members would still have a one-seat majority on the board.

-- NYRA's board chairman would be limited to two four-year terms.

-- There will be no layoffs.

Bruno said he felt Spitzer and Silver --both Democrats -- unduly "pressured" him in recent days to accept the basic elements of Spitzer's proposal to keep NYRA running the tracks.

Bruno cited NYRA's public statements that Bruno was standing in the way of a deal, threatened Saratoga's season that is critical for his district, and would cause layoffs of workers in NYRA and the racing industry.

"We are always hopeful," said NYRA's Lee.

"Unfortunately, lacking an agreement, we've had to prepare our employees as well as trainers and their employees for the reality that racing may cease on Wednesday."

"Are they creating pressure?" Bruno said, noting he's the only leader in talks with a track in his district this legislative election year.

"Absolutely, no doubt about it."

"Nobody squeezed anybody," Francis said.

"The governor has three tracks in his district."

"Court: NY can't enforce $1 million NASD fine against stock broker"

Associated Press

Last updated: 5:53 p.m., Thursday, February 7, 2008

ALBANY -- New York's top court ruled Thursday that lower state courts can't enforce a $1 million fine for improper trading levied by a national regulator against a stock broker and his firm.

The Court of Appeals found state courts have no authority to enforce the disciplinary actions of the National Association of Securities Dealers, now known as the Financial Industry Regulatory Authority.

Wall Street firms join NASD voluntarily and agree to abide by its rules, but the association isn't a government regulator.

The court reversed rulings that upheld the fine against Fiero Brothers and its owner -- securities broker John J. Fiero -- but said Thursday that federal courts could have jurisdiction in the case.

The fine was imposed by NASD for a so-called "bear raid" that drove down the price of securities held by a competitor.

Fiero had signed a registration with NASD in which he agreed to be subject to "all requirements, rulings, orders, directives and decisions of, and penalties, prohibitions and limitations imposed" by NASD.

In December 2000, a NASD hearing board claimed the firm violated the federal Exchange Act and rules of the federal Securities and Exchange Commission and the NASD.

The board expelled the firm from NASD and imposed a $1 million fine, plus $10,000 in hearing costs.

The firm lost an apeal to the NASD's National Adjudicatory Council, according to Thursday's court decision, in 2002.

The firm didn't appeal the decision to the SEC, which could have sought to enforce the order in federal court, the decision stated.

The Fiero Brothers argued the NASD's subsequent attempt to collect the penalty was in the wrong court, because state courts lacked authority in the area.

State Supreme Court sided with NASD in 2005, noting that the firm had agreed to abide by NASD rules.

An appellate court agreed, but the case wasn't done yet with the penalty growing to $1.3 million with interest by 2006.

The Fiero Brothers took the case to the state's highest court, which found that the lower state courts "do not possess the power to hear and decide this controversy."

THIS ARTICLE IS INSERTED HERE FOR BACKGROUND

THE FINANCIAL TIMES

"Rescuing monolines is not a long-term solution"

By William Gross

Published: February 7 2008 18:14 | Last updated: February 7 2008 18:14

What is good for Ambac, the bond insurer, is good for the country.

Well, perhaps in the short run if it prevents a run on the shadow banking system – our over-leveraged system of financial conduits that have provided the spending power to keep the US economy going in recent years.

But not in the long run.

The Ambac business model is as faulty now as was chairman Charles Wilson’s forecast for General Motors more than a half century ago.

Wilson’s response to a US Senate inquiry in 1955 implied that GM’s near monopolistic control was beneficial to the country.

It was, until the domestic motor industry fell asleep at the wheel of innovation and became more concerned with placating its labour unions with outsized pay packages and long-term pension and healthcare benefits.

Creative destruction and the incessant march of globalisation changed a GM chairman’s smile to a frown, and the US economy turned from industrialisation to financialisation in order to stay at the top of the global pecking order.

Those who put their faith in the ability of a finance-based economy to remain healthy are being similarly challenged today.

A critic can find numerous examples of incredible, bubble-popping asset structures – from subprime mortgages to structured investment vehicles to collateralised debt obligations squared – that are threatening to reverse the expansion of the shadow banks and break our finance-based economy’s back.

The most recent one, however, centres around the monoline insurers with Ambac as the most important link in the chain that presumably cannot be allowed to break.

Monoline insurers are so named because they originally covered just one line of business – municipal bonds.

Today, however, because they do not insure lives, or automobiles or medical expenses, the name has stuck despite their additional reach into insuring financial assets of all varieties.

In a real sense, the monolines have taken on their shoulders a supersized portion of the guaranteed solvency of modern asset structures.

In combination with overly generous triple-A ratings on not only these assets but the monoline companies themselves, they have fostered a bubble of immeasurable but clearly significant proportions.

That the monolines could shoulder this modern-day burden like a classical Greek Atlas was dubious from the start.

How could Ambac, through the magic of its triple-A rating, with equity capital of less than $5bn, insure the debt of the state of California, the world’s sixth-largest economy?

How could an investor in California’s municipal bonds be comforted by a company that during a potential liquidity crisis might find the capital markets closed to it, versus the nation’s largest state with its obvious ongoing taxing authority?

Apply the same logic to the gargantuan size of the asset-backed market it has insured in recent years – subprimes and CDOs in the trillions of dollars – and you must come to the same logical conclusion: this is absurd.

It is as if Barney Fife, television’s Sheriff of Mayberry in The Andy Griffith Show, promised to bring law and order to the entire country.

As long as the illusion lasted, however, it is clear that monoline guarantees fostered an expansion of our modern shadow banking system and therefore an extension of US and even global economic prosperity.

Because US consumers were able to borrow at “guaranteed” triple-A rates with an additional servicing/underwriting spread, their spending power was artificially elevated.

In order to maintain those levels and avoid a nasty recession, authorities through both official and backdoor channels now endorse a rescue effort.

What is good for Ambac, they reason, is good for the country – and by extension the world.

As stock markets rise on optimistic workout developments, it is clear that it is – in the short run.

But like General Motors a half century back, the sense of stability imparted to an oligopolistic industry with visible flaws is not likely to last, nor may the hope for a return to economic growth of recent years.

The modern US financed-based economy has a striking resemblance to Barney Fife, guaranteeing global prosperity without the productive industrial-based firepower to back it up.

Neither ultra-low interest rates or tax rebates, nor investor-led and authority-based monoline bailouts are likely to change that significantly during the next few years.

The writer is founder and managing director of Pimco

http://www.ft.com/cms/s/0/bb7e80c8-d58c-11...00779fd2ac.html

"NYRA rescue to go ahead - Despite a $384 million shortfall in projected revenue, state will trim other areas and proceed with bailout, officials say"

By JAMES M. ODATO, Capitol bureau, Albany, New York Times Union

First published: Monday, February 11, 2008

ALBANY -- The Spitzer administration now forecasts $384 million less in revenue than projected three weeks ago, but the state can still afford a bailout of the New York Racing Association, state officials said Sunday.

The administration has decided to demand greater agency belt-tightening, $75 million more in insurance industry taxes and deeper cuts to reimbursement rates paid hospitals, nursing homes and home care providers to balance the next budget.

Recession-like trends require more-conservative budgeting, Budget Director Laura Anglin said Sunday.

But she said the state still plans to provide NYRA $105 million as part of a proposed 25-year franchise extension.

Details of the NYRA plan remained under discussion late Sunday, although negotiators were beginning to give in to demands by the racing association to improve the chances of a deal and avoid the cessation of racing.

Anglin said the weakened economy will produce less than Gov. Eliot Spitzer projected when he released a $124.3 billion spending proposal on Jan. 22.

Amendments to be announced Tuesday to his 2008-09 budget will be more substantial than the typical technical changes that come following an executive budget unveiling, she said.

Indeed, the governor is paring the budget to $124.2 billion, with $56.3 billion raised from general funds, compared with the $56.7 billion proposed last month.

"The risk of recession has increased since we got out our budget," Anglin said.

She is coping with the reduced personal income, corporate franchise and capital gains revenues now forecast by adding $50 million more to the amount the state wants to get by assessing higher fees on health insurance companies.

That is on top of the $140 million Spitzer's already scheduled and increased revenues from the "covered lives assessment," which bring the total tax to more than $1 billion levied on health insurance policies.

Representatives of insurance companies say the assessment is passed on to those paying premiums for private health insurance, such as employers and individuals.

That could result in increasing the number of uninsured in the state by making policies cost too much, industry officials warn, at a time Spitzer is trying to reduce the number of people without coverage.

Anglin said insurers also will be expected to come up with another $25 million to help the state pay for diabetes and obesity prevention programs.

Those costs could also be passed on.

Anglin said the industry can afford the costs because insurers have ample reserves from years of profits.

She also said the prevention programs will help insurance companies because, if successful, more expensive medical care won't be necessary to treat diabetics and the obese.

She also said the state is forced to cut the rates paid to the health care industry by 35 percent, compared with the 25 percent cut Spitzer proposed in January, to save another $18 million.

The state also will try to increase the number of generic drugs provided under its program to help elderly people get medications, saving $19 million.

Another $36 million in "agency efficiencies" are required on top of tens of millions Spitzer called on this year and planned already for next year because of the shortfalls.

Anglin said the agency savings will come from cutting back on overtime, restricting travel and, potentially, curtailing filling vacancies.

She maintained that a hiring freeze is unnecessary.

Wall Street profits and income will be worse than predicted, she said, resulting for much of the pessimistic outlook.

Indeed, she predicted 8.6 percent bonus growth for Wall Street employees next year in January.

Now, she said, the forecast is of no growth after a 5.5 percent dip this year.

Nevertheless, she said, investing in the NYRA franchise is a good short-term spending initiative for long-term economic health in the racing and horse industry.

She did not specify from where the proposed $75 million to help NYRA get out of bankruptcy, or the $30 million for its operations this year, will come.

She said the governor's budget will continue to plan for $250 million from selling development rights for Belmont Park, a plan opposed by Assembly Speaker Sheldon Silver.

Also planned is getting some $100 million from selling development rights on Aqueduct, according to people familiar with negotiations.

Negotiators for Spitzer and the Legislature on Sunday continued working on a proposed deal to extend NYRA's hold on the Aqueduct, Belmont Park and Saratoga tracks, said Steve Newman, chairman of the state's NYRA oversight board.

He said reports of a completed deal have been exaggerated.

NYRA officials maintain it intends to close the Aqueduct winter meet Thursday, off hundreds of personnel, unless acceptable terms are offered.

So far, NYRA officials have turned down the plan worked out privately by the Senate, Assembly and Spitzer officials.

However, the negotiators removed one objectionable term: That any vote of the NYRA board require a supermajority.

It also was expected to capitulate on the composition of the NYRA board to get the deal done.

Senate Majority Leader Joseph L. Bruno, who has been advocating for a greater government control of NYRA's board, said the plan was to set up a board with only one NYRA appointee more than the number of government appointees.

Plans being discussed over the weekend involved giving NYRA 13 members and the Legislature and Spitzer a total of 11.

Three busloads of NYRA employees planned to travel from downstate to the Capitol on Tuesday to express their concerns that a deal is essential, a racing industry official said Sunday.

James M. Odato can be reached at 454-5083 or by e-mail at jodato@timesunion.com.

"Stocks rise in uneasy trading"

By MADLEN READ, Associated Press

Last updated: 5:52 p.m., Monday, February 11, 2008

NEW YORK -- Wall Street finished higher in an uneasy session Monday as retail and homebuilders stocks rose on expectations for more interest rate cuts, but banks and insurers fell on worries about further mortgage debt troubles.

The Federal Reserve has been in rate-cutting mode this year and it is expected to lower the federal funds rate once more either this month or at its next regularly scheduled meeting March 18.

And the cheaper cost of money is beginning to register in the stock market.

"A number of sectors like retail and housing stocks have done better since the Fed acted, and they are leading the market again today," said Steve Goldman, chief market strategist at Weeden & Co.

"These stocks are called early bellwethers and they tend to lead a recovery."

But investors continue to grapple with bad news in the credit markets.

The stock market fell in early trading and remained volatile even after recovering, with Wall Street clearly concerned by news that American International Group Inc. might have more mortgage debt to write off.

AIG, one of the 30 companies that make up the Dow Jones industrial average, said in a regulatory filing it would need to alter the way it values its credit default swaps involving collateralized debt obligations.

Credit default swaps are insurance policies against defaults, and CDOs are funds that contain slices of bonds, some of which are backed by mortgages.

The insurer said auditors found it "had a material weakness in its internal control over financial reporting and oversight" regarding how it valued certain credit default swaps.

The filing raised concerns that there will be further losses at AIG, and that other financial companies might reveal similar problems.

AIG dropped $5.94, or 11.7 percent, to $44.74.

The Dow rose 57.88, or 0.48 percent, to 12,240.01.

Dow Jones & Co. said it was replacing two of the blue chip index's 30 components -- Altria Group Inc. and Honeywell International Inc. -- with Bank of America Corp. and Chevron Corp., effective Feb. 19.

Broader stock indicators ended higher, too.

The Standard & Poor's 500 index rose 7.84, or 0.59 percent, to 1,339.13, and the Nasdaq composite index rose 15.21, or 0.66 percent, to 2,320.06.

In addition to rate cut expectations, Hasbro Inc. gave the market a lift, saying its fourth-quarter income soared 24 percent, thanks to a 16 percent increase in sales.

Its shares rose 54 cents, or 2 percent, to $26.41.

Meanwhile, Yahoo Inc.'s board rejected a $44.6 billion takeover offer from Microsoft Corp. Yahoo said its board concluded that Microsoft's unsolicited offer "substantially undervalues" the Internet search company.

Microsoft, a Dow component, fell 35 cents to 28.21, but Yahoo rose 67 cents, or 2.3 percent, to $29.87.

In other dealmaking news, The Wall Street Journal reported that Motorola Inc. and Nortel Networks are in talks to merge their wireless infrastructure businesses.

If a deal happens, it would create a firm with $10 billion in annual sales.

Motorola rose 31 cents, or 2.8 percent, to $11.57, and Nortel dipped 18 cents to $10.89.

Bond prices rose.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.62 percent from 3.65 percent late Friday.

The dollar was mixed against other major currencies, while gold prices rose.

The Russell 2000 index rose 0.85, or 0.12 percent, to 699.75.

Advancing issues outnumbered decliners by about 8 to 7 on the New York Stock Exchange.

Consolidated volume came to 3.51 billion shares, down from 3.66 billion Friday.

Light, sweet crude oil rose $1.82 to settle at $93.59 per barrel on the New York Mercantile Exchange.

Last week was the worst week, percentage-wise, for the Dow since March 2003.

The blue-chip index fell 4.4 percent, and meanwhile, the S&P's 500 index declined 4.60 percent and the Nasdaq dropped 4.50 percent.

The Dow is about 15 percent below its Oct. 9 record close of 14,164.53, and about 4 percent above the 15-month lows it hit in January.

Though Wall Street managed a gain Monday despite AIG's report suggesting possible credit-related losses, many analysts believe there is still bad news yet to come in the credit markets that could have more deleterious effects on the stock market and the broader economy.

"The absolute seizure of the credit markets in the corporate arena is going to put enormous pressure on American companies," said George Feiger, CEO of Contango Capital Advisors, the wealth management arm of Zions Bancorporation.

"And this is really bad news for the economy."

Overseas, Japan's stock market was closed for a holiday, while in Hong Kong, the Hang Seng index finished down 3.64 percent.

Britain's FTSE 100 closed down 1.32 percent, Germany's DAX index fell 0.35 percent, and France's CAC-40 lost 0.57 percent.

------

AP Business Writer Leslie Wines contributed to this report.

------

On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

"Legislature, lobbying forces blast Spitzer's revised budget"

By MICHAEL GORMLEY, Associated Press

Last updated: 5:17 p.m., Monday, February 11, 2008

ALBANY -- Lawmakers and the labor and business forces that drive New York state government are criticizing Gov. Eliot Spitzer's gloomy revision of his state budget proposal.

Projecting $384 million less in revenue for the budget due April 1 because of a continued decline in the national economy, Spitzer trimmed his proposed 2008-09 budget so it would increase spending by 4.8 percent over the current budget.

Before the amendments, the plan was to increase spending by about 5 percent to a total of $124 billion.

To help fill the gap, Spitzer proposes $36 million in savings at government agencies, a withdrawal of $25 million from the Environmental Protection Fund, and $50 million more revenue from a "covered lives assessment" charged to health insurance companies, among other measures.

"The governor would increase taxes again," said Republican Assemblyman James Hayes of Erie County at a legislative budget hearing.

"It will almost assuredly be put on the backs of consumers and insurers in New York state."

Senate Republican leader Joseph Bruno says Spitzer's to plan hike assessments on health insurers is actually a tax increase, despite the governor's promise not to raise taxes.

Bruno says the state will lose businesses if they are taxed more and much of the cost will likely be passed on to consumers.

"I don't know the economics of that, I don't know the common sense of that," Bruno said.

Assembly Speaker Sheldon Silver says he understands Spitzer's economic concerns, but says the Legislature still must review and revise the proposed budget.

"It's a good starting point," Silver said of Spitzer's budget.

But he added: "We clearly have concerns."

He told the New York Bankers' Association Monday that although there is "uncertainty in our economy," the state must honor its moral obligations to increase school aid, provide health care for every child, and other measures that are priorities for the Democrat-led Assembly.

The New York Health Plan Association said Spitzer's latest targeting of health care cuts too deeply when the governor also wants to make sure more New Yorkers have health insurance.

"The proposed amendments to the 2008-2009 Executive Budget clearly raise taxes on those who currently have health insurance and, frankly, we are perplexed at how Gov. Spitzer hopes to expand the number of New Yorkers covered by health insurance when he is making the very cost of insurance more unaffordable," said Paul Macielak, president and CEO of the association.

He said Spitzer's amendments would result in a $190 million increase in the assessment on health plans if the Legislature doesn't change it.

"The covered lives assessment is pure and simple a tax on every insurance policy sold in New York," he said.

Environmentalists are also upset with Spitzer's amendment.

Spitzer's plan to take $25 million more from the Environmental Protection Fund will result in a total loss of $125 million or about half the fund, said John Sheehan of The Adirondack Council.

Sheehan said Spitzer's budgeting threatens the planned purchase of $200 million worth of Adirondack land that would protect those areas from development.

"The EPF was created by the Legislature to be used for the express intent of environmental protection and the protection of public health," said the council's Scott Lorey.

"This raid on the dedicated fund is contradictory to the Legislature's intent for creating it."

"Lake-effect snow batters communities along eastern Lake Ontario"

Associated Press

Last updated: 3:52 p.m., Monday, February 11, 2008

OSWEGO, N.Y. -- Persistent lake effect squalls buried parts of upstate New York along eastern Lake Ontario under more than three feet of snow Monday.

Route 104 was nearly impassable in some sections between Oswego and Hannibal due to tractor-trailer accidents, state police said.

The blowing snow prompted Oswego Town Supervisor Victoria Mullen to issue a statement asking motorists to avoid the area because of hazardous driving conditions.

"The highway crews are having a difficult time keeping up with the amount of snow and blowing conditions," Mullen said.

Forecasters said the squalls were expected to continue Monday night.

A winter storm warning was in effect for Tuesday when a storm system developing over the lower Mississippi Valley was expected to bring widespread snow to upstate New York.

Meanwhile, many schools from Buffalo to Syracuse were closed or delayed the start of classes Monday because of bitterly cold conditions.

Single-digit temperatures plus high winds drove the wind-child factor to nearly 20 below across much of upstate New York.

The arctic conditions hit the region on Sunday, when blowing snow was blamed for a 36-car pileup on an interstate just west of Rochester.

A 17-year-old girl was killed in the crash and 24 other people were injured.

"Empire Zone tax breaks for businesses blasted"

By MICHAEL GORMLEY, Associated Press

Last updated: 3:23 p.m., Monday, February 11, 2008

ALBANY -- State Comptroller Thomas DiNapoli said Monday that the state's multimillion dollar Empire Zone program isn't monitored closely enough to determine whether it's effective at retaining and attracting jobs.

The Democrat said it's time for the state to rethink the program, which gives millions of dollars in tax breaks to companies.

The Empire Zone program was also a topic Monday at a state budget hearing on economic development programs.

Westchester Assemblyman Richard Brodsky said Empire Zones have failed to turn around the upstate economy.

He proposed a new approach, including helping businesses pay employees higher, union-level wages to create an economic engine that would help communities thrive.

"If these programs were for poor people it would have been shot down years ago," Brodsky said.

He noted the $30 million bailout of dairy farmers in 2007 was a success because it sent checks directly to 5,100 farmers hurt by falling prices.

He said the farmers used that money in their communities, creating a positive ripple effect in the economy.

Spitzer economic development chiefs Dan Gundersen and Patrick Foye told legislators at the hearing that the program is being changed.

They said aid is now being more clearly targeted to need in each region.

As a candidate, Spitzer had been critical of Empire Zones under the Pataki administration, saying they were long used to help political cronies and failed to provide the jobs that were promised.

DiNapoli, a Democrat, found that officials failed to determine if job creation claims in Empire Zones were accurate.

His report was based on reviews of Empire Zones in municipalities including Buffalo, Syracuse, Rochester, Tonawanda and Yonkers and in Broome County.

A 2004 comptroller's office report found similar concerns in those areas.

"New York should take another look at the Empire Zone program," DiNapoli said.

"We need to know if we're getting a bang for the taxpayers' buck."

"If officials representing local zones can't demonstrate that the program is working, and if local governments and taxpayers are not benefiting from a program that's supposed to generate economic development and create jobs, it calls into question the value of the program."

After years of criticism, Monday's comments could signal the beginning of an overhaul of the system that was at the core of economic development efforts by Pataki and the Legislature.

Senate Republican leader Joseph Bruno of Rensselaer County agreed he could support some changes in Empire Zones to make sure the jobs that are promised are realized.

But he said there's no need to scrap the program.

"I think they have been effective," Bruno said.

THE NEW YORK TIMES

"Spitzer Quickly Reduces Revenue Projections, Citing the Gloomy Economy"

By DANNY HAKIM

Published: February 11, 2008

Only three weeks after presenting its budget, Gov. Eliot Spitzer’s administration is lowering projections for tax revenue by $384 million, because of increasingly ominous reports of distress on Wall Street and in the nation’s economy.

To keep the budget in balance, the governor is proposing several new spending cuts, including further paring back increases in Medicaid reimbursements to hospitals, nursing homes and other health care providers, and dipping into the state’s environmental protection fund more than had been expected.

While the changes represent a small fraction of New York’s $124 billion budget, they are a sign of how rapidly shifting economic forecasts are causing havoc with the state’s fiscal planning.

It is rare for a governor to second-guess his own budget, especially so soon after releasing it.

The new projections may also be an indicator of long-term problems; the state is anticipating annual tax revenue to be $500 million less than expected for several succeeding years.

The governor’s budget director, Laura L. Anglin, said she did not know whether the administration might have to cut back further later in the year.

“I cannot rule that out,” Ms. Anglin said on Saturday.

“If things continue to deteriorate, it will become part of the budget discussions again."

"We hope that’s not the case.”

The governor is already taking criticism from advocacy groups that say he cut too much with his first effort, and from fiscal conservatives who have called for even deeper cuts than Mr. Spitzer is now proposing.

Some prominent labor unions in industries affected by the cuts have taken steps to bolster their alliances with Senate Republicans.

Explaining how the state’s numbers could shift so quickly, Ms. Anglin said the budget released by the Spitzer administration on Jan. 22 was based on an economic forecast from the end of last year.

In recent weeks, several forecasters have said that the nation’s economy is in recession, though Mr. Spitzer is not ready to go that far.

“Obviously the national economic situation has continued to deteriorate; the risk of a recession has increased,” Ms. Anglin said.

The new plan calls for state spending to increase by 4.8 percent — still more than one and a half times the rate of inflation — instead of 5 percent.

The governor and the Legislature will negotiate a final budget over the next several weeks, aiming for a March 31 deadline.

The primary causes for the new estimate are shrinking projections for Wall Street bonuses because of losses on subprime mortgages and lower-than-expected revenue from capital gains taxes on real estate transactions.

The Spitzer administration had projected that Wall Street bonuses would recover by next year and grow by 8.6 percent.

Its new projection is for bonuses to remain flat next year after falling 5.5 percent this year.

“You keep wanting to put one foot on the ground,” Ms. Anglin said, “but it’s hard to tell where you’re going to land.”

Besides smaller increases in Medicaid spending, the administration will propose making health insurers finance some programs the state had planned to pay for, like vaccinations against cervical cancer and anti-obesity efforts.

The state is making up $147 million of the shortfall because lower Medicaid enrollments are leading it to reduce estimates of spending for some health programs.

The governor also plans to take about $25 million that was set aside for environmental programs and use it instead for general spending.

Mr. Spitzer’s original budget had a deficit of $4.4 billion.

He proposed to close it by reducing increases in health care spending by $1 billion and paring a planned rise in education aid.

Teachers’ and health care workers’ unions had already vowed to fight for more money in their sectors.

The latest changes will include some creative steps, like prepaying $88 million to the state pension fund so it will count in the current fiscal year instead of the next one, which begins April 1.

Edmund J. McMahon, director of the Empire Center for New York State Policy, a conservative group, said last week that the governor should propose a spending increase closer to the rate of inflation, projected at 2.7 percent for the state.

Among other things, he said, the administration should be cutting jobs, instead of adding them, as is still the plan.

“Government should be forced to live well within its means, especially at a time like this,” Mr. McMahon said.

Ms. Anglin portrayed the revisions as the only viable course.

“It was really the right decision to put forward such major revisions, but it’s not normally done,” she said. “People will be surprised. It was the right thing to do to protect the state’s finances.”

http://www.nytimes.com/2008/02/11/nyregion...amp;oref=slogin

THE NEW YORK POST

"PAPER-TRAIL SHOCK - GOV'S FILES BARE PLOT'S EARLY START"

February 11, 2008 -- Gov. Spitzer'S office has turned over "damaging" documents to the Albany County District Attorney's Office revealing that the Dirty Tricks plot against his chief GOP opponent began much earlier than suspected, The Post has learned.

Law-enforcement sources said Dirty Tricks Scandal material subpoenaed weeks ago by DA David Soares from Spitzer's office suggests that the effort to damage or destroy the career of state Senate Majority Leader Joseph Bruno (R-Rensselaer) began as early as January 2007, the month Spitzer took office.

"The documents, which include e-mails, are damaging and embarrassing, and the press will have a field day if the material ever becomes public," said a source close to Spitzer.

Meanwhile, two sources said Spitzer's chief counsel, David Nocenti, testified under oath for several hours on the scandal Thursday before the state Public Integrity Commission, which is conducting its own probe.

A day later, members of the Spitzer-controlled commission - which is believed to be focusing on the actions of former top Spitzer aide Darren Dopp - were told at a secret "executive session" that action in the case, most likely a charge against Dopp, is expected within weeks.

Until now, Spitzer - who has yet to testify under oath about the scandal - has maintained that the use of the State Police by his aides to gather supposedly damaging information on Bruno began only weeks before The Post disclosed the existence of the plot last July 5.

Spitzer, in response to Attorney General Andrew Cuomo's bombshell July 23 report on the plot, also insisted he became aware of the effort to gather evidence on Bruno only shortly before The Post's disclosure.

Meanwhile, officials said "serious tensions" have developed between Soares and Herbert Teitelbaum, executive director of the Spitzer-controlled Public Integrity Commission, over who should have the lead responsibility for investigating the scandal.

Soares, officials said, believes Spitzer's aides are pressing Teitelbaum to place most of the blame for the scandal on Dopp, even though evidence made public by Cuomo shows that other senior officials were involved.

Soares has told associates he is conducting a "much broader" review of the scandal and has said others besides Dopp were deeply involved.

Dopp, a longtime Spitzer loyalist now working for Spitzer-connected lobbyist Pat Lynch, has sent signals to several political figures that he "won't remain silent" if he is legally charged.

fredric.dicker@nypost.com

http://www.nypost.com/seven/02112008/news/...shock_19928.htm

THE NEW YORK DAILY NEWS

"New Troopergate probe on Spitzer's top state counsel Nocenti"

Monday, February 11th 2008, 4:00 AM

Troopergate probers are taking aim again in Albany, with the cross hairs now trained on Gov. Spitzer's top state counsel.

David Nocenti, who joined Spitzer in his first days as state attorney general in the 1990s, was grilled for several hours last week by the state Commission on Public Integrity, according to a source familiar with its investigation.

The probe centers on the Spitzer administration's failed effort to discredit the governor's top political enemy - Senate Majority Leader Joseph Bruno.

A source close to Albany County District Attorney David Soares confirmed he, too, is looking with renewed interest at Nocenti, who notarized statements given to state Attorney General Andrew Cuomo last July by Spitzer's former communications director, Darren Dopp, and the governor's secretary, Richard Baum.

Both Dopp and Baum had refused to be interviewed by Cuomo's investigators.

Neither Nocenti nor his attorney, Peter Moschetti, a former member of the now-defunct state Lobbying Commission, returned calls for comment.

Investigators have questioned whether the statements Nocenti notarized were properly sworn, despite the governor's own insistence to the contrary.

The Notary Public License Law requires notaries to issue oaths.

Failure to do so is a misdemeanor, although experts say the law is routinely flouted and charges are rarely brought.

The tersely worded statements notarized by Nocenti do not include a phrase typical to sworn affidavits - "the signatories attest to these statements under penalty of perjury" - but merely state that they were sworn to Nocenti on July 22.

Confusion over the statements prevented Soares from charging Dopp with perjury in December after the Public Integrity Commission flagged a discrepancy between Dopp's written statement to Cuomo and his testimony under oath before the commission.

Soares initially cleared his fellow Democrat, Spitzer, of any wrongdoing in a report released in September and went so far as to say that he did not believe the governor and his aides engaged in "a plot to smear" Bruno, adding, "It's pretty hard to believe that they actually conspired."

But Soares reopened his investigation two months later, eying a potential perjury charge against Dopp.

The DA is also reportedly trying to determine whether Dopp was pressured, coerced or encouraged to sign his statement to Cuomo by other Spitzer aides -including Nocenti, and two other lawyers, Peter Pope and Sean Patrick Maloney.

The Public Integrity Commission has also subpoenaed an Aug. 10 letter to Nocenti from Terence Kindlon, a lawyer who once represented Dopp, asking the administration when Dopp would be reinstated to his $175,000-a-year job.

Dopp, another veteran of Spitzer's attorney general office, was suspended without pay by the governor on July 23, after Cuomo released a report that found Dopp and another former Spitzer aide, William Howard, had misused the state police in their effort to tar Bruno, although they did not break any laws.

Dopp returned to the payroll Aug. 27 - just over one week before he testified before the Public Integrity Commission - but he only drew vacation pay and wasn't formally reinstated to his job.

He left the governor's staff and now works for Albany lobbyist Patricia Lynch as a communications specialist.

ebenjamin@nydailynews.com

http://www.nydailynews.com/news/columnists...amin/index.html

THE NEW YORK TIMES

"Editorial - On Investigating a Republican"

Published: February 9, 2008

The federal investigation involving Joseph Bruno, the New York Senate majority leader, reportedly broadened this week.

The wider investigation raises new questions about Mr. Bruno’s own conduct, of course.

But, the sluggish pace also makes us ask whether White House politics could be dragging out an investigation of considerable importance to New Yorkers and to Washington.

Mr. Bruno first said that he was part of a federal inquiry in December 2006, but he indicated that the investigation had been going on for some time.

The questioning seemed to focus in part on a consulting business he runs, the details of which have always been unnecessarily sketchy.

This week, The Times reported that the investigation had expanded to include subpoenas to pension funds affiliated with various union locals.

The unions, which often have business before the Legislature, have large sums in an investment fund that once employed Mr. Bruno.

Mr. Bruno has denied any wrongdoing or that he is a target.

And there have been no charges filed.

Still, New Yorkers have a strong interest in having these matters settled as quickly as possible.

By virtue of his control over the State Senate, Mr. Bruno is an enormously important figure in state government.

He not only has a large say in how laws are written and taxpayers’ money is spent, but he is also the state’s top Republican official.

This year, Mr. Bruno’s efforts are crucial as he heads up the fight to keep the State Senate in the hands of his fellow Republicans.

Because Democrats control the lower house and Gov. Eliot Spitzer is a Democrat, losing the narrow Republican majority in the Senate would be a big deal far beyond Albany.

New York’s Democrats would then control Congressional redistricting after the 2010 census and could use their power to wrest seats in the House from the Republicans.

Given all of this, it is hard not to be at least a tad skeptical of the pace at which the investigation is proceeding.

Last year, it became clear that the Bush Justice Department was driven by political partisanship.

After revelations pointing to political motives in hiring and firing United States attorneys, which led to former Attorney General Alberto Gonzales’s resignation, the Justice Department hardly deserves the benefit of the doubt in its handling of investigations of Republicans.

In the end, Mr. Bruno may well be fully exonerated, but right now these serious questions are out there hanging over the Senate and its leader.

New Yorkers are entitled to have the matter wrapped up as quickly as possible, to resolve any doubts about Mr. Bruno and about those charged with investigating him.

http://www.nytimes.com/2008/02/09/opinion/...runo&st=nyt

THE NEW YORK TIMES

"The Empire Zone - Bruno’s Activities Give Pause to Ethics School"

By DANNY HAKIM

Published: February 11, 2008

ALBANY — The federal investigation of the Senate majority leader, Joseph L. Bruno, is weighing on a Connecticut school dedicated to teaching ethics.

How’s that?

Wright Investors’ Service, an investment firm that had employed Mr. Bruno, below, for more than a decade, is largely owned by the School for Ethical Education.

John Winthrop Wright, the former chairman and chief executive of Wright Investors’ Service, founded the school and left his Wright holdings to it upon his death in 1996. T

The school has no students of its own but teaches ethics courses to students at institutions ranging from elementary schools to colleges.

Both the school and Wright are based in Milford, Conn., and continue to be closely intertwined.

Not only does the school own roughly 40 percent of Wright, but the chairman of the school’s board, Peter Donovan, is also the chairman and chief executive of Wright, and other Wright executives also serve on the school’s board.

Some of the non-Wright trustees said they were concerned that Wright had been enmeshed in a federal investigation of Mr. Bruno’s business activities.

Wright and Mr. Bruno severed their relationship in December after The New York Times disclosed that several labor union locals that were close to Mr. Bruno and had lobbied Senate Republicans had been using Wright to manage their pension money.

Federal investigators have subpoenaed records from several of the pension funds.

“Our big push is to tell people they need role models,” said Jacky Durrell, one of the non-Wright trustees, adding, “You can’t tell people how to act if you aren’t following the rules.”

In a statement, Wright Investors’ Services said that the company had “steadfastly supported S.E.E.’s mission of promoting the advancement of ethical behavior” and “we also practice what we preach.”

The statement concluded, “Any suggestion that the events of recent months represent a departure from those standards or compromise our ability to maintain a close working relationship with the school in support of its principles is without foundation.”

Mr. Bruno reiterated last week that he had done nothing wrong.

Another non-Wright trustee, Steve Monahan, said that he was prepared to raise the issue of Mr. Bruno’s job at a meeting late last year “but Donovan pre-empted me by saying Bruno had already resigned.”

Mickey Herbert, another trustee who is not employed by Wright, described the discussion from a recent board meeting:

“What we were told was that they didn’t believe the school or Wright had done anything wrong.”

Asked whether Mr. Donovan should step down from his role at the school, Mr. Monahan said:

“I think as chairman of the school, he does a very good job."

"I think it’s a reasonable question to put on the table, but I see no reason to consider it at this time.”

Plan for a Free College Education

A boon for Syracuse parents is tucked away in the bowels of the budget.

Under a pilot program, the Spitzer administration is proposing that Syracuse high school graduates be eligible for free tuition to any State University of New York or City University of New York college.

The proposal will require the approval of the Legislature and is expected to cost a couple of million dollars annually within a few years.

Would the program expand beyond Syracuse?

While the Syracuse effort is linked to a program by the private Say Yes to Education foundation, Manuel Rivera, the state’s deputy secretary for education, said, “The success of the demonstration will determine future expansion of the program.”

A Debate Over Parole Rates

Republican lawmakers are blaming the Spitzer administration for an increase in the parole rates of violent criminals.

“This administration philosophically seems to be very soft on criminals and doing everything and anything they can to get prisoners who have committed murder out of prison,” the Senate majority leader, Joseph L. Bruno, said last week.

Mr. Bruno and other Senate Republicans have introduced legislation that would make it tougher for the state’s most violent prisoners to get out on parole.

Thirteen percent of first-time violent offenders were paroled last year, up from 3 percent in 2005, according to the parole board.

Errol Cockfield, a spokesman for Gov. Eliot Spitzer, pointed out that most of the appointees on the parole board were Republicans.

Of the 17 members on the board, 5 were appointed by Mr. Spitzer.

“The overwhelming majority of appointees now serving on the state parole board were appointed by former Governor George Pataki and confirmed by the Republican-led Senate,” Mr. Cockfield said.

In January 2006, about 1,000 inmates filed a class-action lawsuit against the Pataki administration, claiming that they were unfairly denied parole.

The case is ongoing.

TRYMAINE LEE

Making Businesses Accountable

In recent weeks, the Spitzer administration has sent letters to 180 businesses threatening to rescind their tax credits under the Empire Zone program because they had not created enough jobs.

The administration also made it tougher to earn future credits under the program, which tries to encourage economic growth.

The steps are aimed at shoring up a program that has cost the state billions of dollars, and not always with appreciable results.

Warning letters were sent to 2,500 businesses last year, and the latest round has only begun.

“Some of those 180 companies have already given up the ghost and told us they’re not going to contest it,” said Patrick Foye, above, the downstate chairman of the Empire State Development Corporation.

“The news here is that there will be for the first time ever companies decertified under the Empire Zone program,” he said.

Kenneth Adams, president of the Business Council of New York State, said he supported efforts to tweak the program, but added, “There should be less emphasis on looking back, nickel-and-diming companies.”

But the move did draw praise from a frequent administration critic.

“For all the shouting of reform, this is finally the beginning of reforming something that really matters,” said Assemblyman Richard L. Brodsky, a Westchester Democrat.

http://www.nytimes.com/2008/02/11/nyregion...ml?ref=nyregion