Illinois attorney general sues Standard & Poor's (AP)

CHICAGO – The Illinois attorney general filed a lawsuit Wednesday accusing Standard & Poor's of misleading investors by assigning its highest ratings to risky mortgage-backed investments during the years leading up to the crash of the housing market.

The lawsuit from Lisa Madigan's office alleges the agency compromised its independence by issuing high ratings for unworthy or risky investments as part of a strategy to boost revenue and market share. The lawsuit cites internal emails and conversations, including an instant messenger exchange in April 2007 in which an employee tells another that an investment "could be structured by cows and we would rate it."

"Publically, S&P took every opportunity to proclaim their analyses and ratings as independent, objective and free from its desire for revenue," Madigan said. "Yet privately, S&P abandoned its principles and instead used every trick possible to give deals high ratings in order to retain clients and generate revenue."

Madigan's lawsuit singled out mortgage-backed securities, saying Standard & Poor's misrepresented the risks by giving the investments its highest rating of AAA.

A spokesman for Standard and Poor's rejected the claims.

"The case is without merit, and we will defend ourselves vigorously," said David Wargin.

A spokeswoman for Madigan, Robyn Ziegler, said the attorney general began investigating Standard & Poor's in early 2010. The probe is continuing, but Madigan determined that it had progressed enough to file the suit, Ziegler said. Madigan previously had been involved in discriminatory-lending lawsuits against Bank of America subsidiary Countrywide Financial Corp. and Wells Fargo.

The financial products singled out in the Standard & Poor's lawsuit involve the bundling of a pool of mortgages that are then sold as securities. They are backed by residential mortgages, including the subprime mortgages that have been blamed for much of the economic turmoil set off by the housing crash in 2007 and 2008.

Madigan's lawsuit said the S&P ignored the risks of those securities in giving them ratings that were favorable to the agency's investment bank clients and its own profits.

The performance of those investments had a significant impact on institutional investors in Illinois, including pension funds and 401(k) managers, the lawsuit said.

"The mortgage-backed securities that helped our market soar — and ultimately crash — could not have been purchased by most investors without S&P's seal of approval," Madigan said.

The lawsuit also cites testimony before Congress by a former managing director of the ratings agency who said "profits were running the show."

Madigan has also targeted mortgage lenders she accuses of having preyed on home owners.

Her office filed suit against Bank of America subsidiary Countrywide Financial Corp. in 2010. In that suit, Madigan accused Countrywide of consistently selling African-American and Hispanic borrowers riskier loans at a higher cost than it sold to white borrowers with similar credit ratings.

In December, the U.S. Department of Justice announced a settlement of $335 million with Bank of America that stemmed from that lawsuit.

Madigan is pursuing a similar lawsuit against Wells Fargo, which she also accuses of discriminatory lending.

Amazon Cell Phone Center

California attorney general subpoenas Fannie, Freddie: report (Reuters)

(Reuters) – The California attorney general's office has sent subpoenas to Fannie Ma (FNMA.OB)e and Freddie Mac in a wide-reaching probe into the government-backed mortgage giants' lending and foreclosure practices, the Los Angeles Times reported Thursday.

The subpoenas are seeking information about how Fannie and Freddie are handling thousands of foreclosed properties, as well as details about their mortgage-servicing and home-repossession practices, the LA Times reported, citing sources families with the matter.

California regulators are also investigating how Fannie and Freddie bought and sponsored securities holding toxic mortgages, and how their activities might have contributed to the wave of foreclosures in California, the sources told the LA Times.

A spokesman for California Attorney General Kamla Harris, Shum Preston, said he could neither confirm nor deny the report. Representatives for Fannie and Freddie were not immediately available for comment.

Recently, Harris has called on Fannie and Freddie to cut mortgage debt on the loans they own, in an attempt to help beleaguered California homeowners keep their homes. Fannie and Freddie have long resisted such a move.

"It has become clear to me that the only way to keep distressed California homeowners in their homes is through meaningful principal reduction," attorney general Kamala Harris said in a statement on November 3.

The two companies have been propped up with about $145 billion in taxpayer support since they were seized by the government and placed into conservatorship in September 2008.

California has faced some of the worst default rates in the country in the wake of the foreclosure crisis, with two million residents who owe more on their mortgage than their home is worth.

(Reporting by Jessica Dye, editing by Bernard Orr)

Browse your computer here

New York Times Gives False Information on General Electric's Zero Income Tax Bill (ContributorNetwork)

COMMENTARY | It is hard to imagine that General Electric (GE), whose nuclear plants have been in the spotlight since the recent Japanese earthquake and subsequent tsunami, would have anything positive to say about that natural disaster, but the media uproar that followed it meant that the world's newspapers were distracted from the multinational corporation's recent SEC filing. That filing, Form 10-K, revealed that in 2010, for the second year in a row, General Electric paid zero federal income taxes.

The 258 page long PDF document was finally analyzed this week by reporters who latched onto phrases like "GE's effective tax rate is reduced because active business income earned and indefinitely reinvested outside the United States is taxed at less than the U.S. rate." The New York Times in particular took pleasure in writing a long-winded four-page diatribe that all but accused GE's tax department, led by John Samuels, a former Treasury official, of committing tax evasion in an effort to avoid paying the 35% federal income tax rate on tax profits.

What most readers of the New York Times, and anyone else not well versed in accounting rules and tax regulations, is likely unaware of, is that tax profits are different than book profits. There are expenses that can be deducted for accounting records but not for tax liabilities and vice versa. Major corporations like GE do complicated calculations each quarter to find out exactly what those differences are so that there are no ugly surprises when they report information to both their shareholders and the taxing authorities.

One of the New York Times' accusations is that GE pays no taxes in the United States. Logic tells us, though, that this simply is not true. With nearly 150,000 employees in the United States, GE pays millions in payroll taxes like employers of all sizes. GE also may pay income taxes to those states that it has a significant presence. While each state defines nexus, which triggers income tax return filing requirements, differently, considering GE's size, it is likely that they file and pay taxes in many states in this country. They also likely pay franchise tax fees as well as sales tax to various states and cities.

GE also has operations overseas and pays taxes to those countries. Like many large companies they hold profits overseas rather than have them repatriated to the United States and taxed at the 35% rate. While the New York Times criticized President Barack Obama's remarks that he wanted to reduce the corporate tax rate, the reason for doing so is to compete with these low tax countries. While the New York Times and others may not like that there are more than a hundred other countries in which GE and other companies can build factories and have offices, the reality is that there are. If the United States' citizens want to keep those jobs in our country, then competing with those countries' tax rates and laws is an essential part of doing so.

Although the New York Times criticized Samuels and his 975-employee department for "looking to exploit opportunities to reduce tax" as part of their day-to-day mission, that tax-accounting-speak really just means cutting costs. Taxes have a huge impact on a business's decisions, and to pretend that GE, which must work constantly to remain profitable amongst its competitors, should not work to cut that cost is naive and absurd.

The most ridiculous part of the New York Times' report though was the moronic extrapolation of the statement "U.S. current tax provision on continuing operations" to mean that the $2.7 billion tax benefit listed on GE's accounting records was a check from the IRS. All this means is that during the time period covered, GE erroneously accrued an expense of $3.2 billion in income taxes. When they did not have to pay that income taxes, they reversed that expense.

The bottom line? GE did what it had to do in 2010 to remain in business, which is to obey the laws while staying competitive. The New York Times on the other hand failed to hire competent writers, editors or researchers in 2011.

Shayna Leah offers an up close look at current issues facing taxpayers. An experienced tax accountant, she uses her familiarity with current tax issues and trends to break down the hottest issues and stories.

Browse your computer here

New York Times Gives False Information on General Electric's Zero Income Tax Bill (ContributorNetwork)

COMMENTARY | It is hard to imagine that General Electric (GE), whose nuclear plants have been in the spotlight since the recent Japanese earthquake and subsequent tsunami, would have anything positive to say about that natural disaster, but the media uproar that followed it meant that the world's newspapers were distracted from the multinational corporation's recent SEC filing. That filing, Form 10-K, revealed that in 2010, for the second year in a row, General Electric paid zero federal income taxes.

The 258 page long PDF document was finally analyzed this week by reporters who latched onto phrases like "GE's effective tax rate is reduced because active business income earned and indefinitely reinvested outside the United States is taxed at less than the U.S. rate." The New York Times in particular took pleasure in writing a long-winded four-page diatribe that all but accused GE's tax department, led by John Samuels, a former Treasury official, of committing tax evasion in an effort to avoid paying the 35% federal income tax rate on tax profits.

What most readers of the New York Times, and anyone else not well versed in accounting rules and tax regulations, is likely unaware of, is that tax profits are different than book profits. There are expenses that can be deducted for accounting records but not for tax liabilities and vice versa. Major corporations like GE do complicated calculations each quarter to find out exactly what those differences are so that there are no ugly surprises when they report information to both their shareholders and the taxing authorities.

One of the New York Times' accusations is that GE pays no taxes in the United States. Logic tells us, though, that this simply is not true. With nearly 150,000 employees in the United States, GE pays millions in payroll taxes like employers of all sizes. GE also may pay income taxes to those states that it has a significant presence. While each state defines nexus, which triggers income tax return filing requirements, differently, considering GE's size, it is likely that they file and pay taxes in many states in this country. They also likely pay franchise tax fees as well as sales tax to various states and cities.

GE also has operations overseas and pays taxes to those countries. Like many large companies they hold profits overseas rather than have them repatriated to the United States and taxed at the 35% rate. While the New York Times criticized President Barack Obama's remarks that he wanted to reduce the corporate tax rate, the reason for doing so is to compete with these low tax countries. While the New York Times and others may not like that there are more than a hundred other countries in which GE and other companies can build factories and have offices, the reality is that there are. If the United States' citizens want to keep those jobs in our country, then competing with those countries' tax rates and laws is an essential part of doing so.

Although the New York Times criticized Samuels and his 975-employee department for "looking to exploit opportunities to reduce tax" as part of their day-to-day mission, that tax-accounting-speak really just means cutting costs. Taxes have a huge impact on a business's decisions, and to pretend that GE, which must work constantly to remain profitable amongst its competitors, should not work to cut that cost is naive and absurd.

The most ridiculous part of the New York Times' report though was the moronic extrapolation of the statement "U.S. current tax provision on continuing operations" to mean that the $2.7 billion tax benefit listed on GE's accounting records was a check from the IRS. All this means is that during the time period covered, GE erroneously accrued an expense of $3.2 billion in income taxes. When they did not have to pay that income taxes, they reversed that expense.

The bottom line? GE did what it had to do in 2010 to remain in business, which is to obey the laws while staying competitive. The New York Times on the other hand failed to hire competent writers, editors or researchers in 2011.

Shayna Leah offers an up close look at current issues facing taxpayers. An experienced tax accountant, she uses her familiarity with current tax issues and trends to break down the hottest issues and stories.

Browse your computer here

Manpower, Tampa General Embrace the Cloud (PC World)

Several companies, including Manpower and Tampa General Hospital, are announcing on Thursday their adoption of Microsoft BPOS applications, pointing to progress the software giant is making in the cloud realm and also to new features and pricing models users would like to see as such software becomes a bigger part corporate IT.

Manpower, a global provider of staffing services, says it is saving about US$2.2 million annually now that, since 2009, it has migrated 20,000 employees to Exchange Online from a disparate array of outdated on-premise e-mail systems.

By the end of this year, Manpower expects to have increased that number to 30,000 mailboxes, or about 80 percent of its user base, and finish the migration next year, said Denis Edwards, the company's CIO and senior vice president.

"A challenge we were having was our ability to communicate and collaborate across our operations," Edwards said.

Manpower, which has almost 4,000 local offices in 82 countries, has also transformed the way its employees share information and collaborate globally through the use of SharePoint.

In 2009, with the global economic crisis in full force, Manpower decided to hold its annual senior leadership summit meeting virtually, using SharePoint as the technology cornerstone.

Not only did the company save about $1 million by not having to host 175 people from around the world at a conventional in-person conference, but the use of SharePoint during the meeting opened the eyes of many senior managers regarding the possibilities of collaboration software, he said.

SharePoint was used for online chats, document sharing, information exchange, video streaming and message boards.

"It went off without a hitch. No one thought we'd be able to pull this off virtually but our senior management team learned a lot about the value and power of collaboration during that meeting. That was the biggest benefit," Edwards said.

Manpower is looking closely at the next version of BPOS (Business Productivity Online Suite), called Office 365, particularly for its Lync Online component, an upgrade to BPOS' Office Communications Online.

BPOS also includes Exchange Online, SharePoint Online and Office Live Meeting. While the BPOS applications are based on the 2007 versions of their on-premise counterparts, Office 365's components are based on their 2010 versions. Office 365 is currently in beta.

One thing Edwards would like to see Microsoft do with BPOS and eventually with Office 365 is to move the pricing closer to an on-demand, pay-per-use model.

"I'd like Microsoft to just charge me for CPU cycles and the storage I'm using at a point in time, instead of making me pay for a [unused mailbox space]," he said. "I'm really looking for them to evolve into that true on demand pricing model. I know it'll take a while to get there but it's something we continue to push them to do because it will give us the real flexibility we need as customers."

At Tampa General Hospital, the IT department recently started moving 7,000 employees away from an old, creaky and unstable on-premise e-mail platform to Exchange Online, with a target of migrating eventually a total of 9,000 users, said Shane Ochotny, technology architect at the Florida hospital.

"We knew that the cloud was the way we wanted to go because we're in the health-care business. E-mail is e-mail and calendaring is calendaring and it should be a service like electricity or water: you pay a bill and it's there and available," he said. "We don't want an entire team of e-mail administrators just making sure e-mail is up and running when we can have them doing something far more innovative."

However, the project's scope extends beyond e-mail. Tampa General Hospital is looking at BPOS, and eventually Office 365, to anchor the implementation of an ambitious unified communications platform tailored to the concept of a "deskless worker."

That will involve moving several terabytes worth of files stored in legacy servers over to a SharePoint-based system, with Lync Online tying together a variety of communications services, including a brand new third-party video conferencing platform.

"Our goal is to have one website people can go to, log in and have their e-mail, calendar, contacts, IM and all their files: everything they need to do their jobs will be available from any computer anywhere, including from a mobile phone," Ochotny said.

Currently, employees store documents on the file servers, which are "a mess of duplicates and stuff you can't find," he said. That has made e-mail the main collaboration tool, creating the dreaded situation of having multiple versions of files being sent around e-mail, as opposed to working on them on a central server-based repository.

"We're trying to get people to break away from that old way of collaborating," he said.

While enterprises have had multiple concerns over the years about the viability, security and performance of cloud-based applications and services, CIOs and IT managers increasingly take the plunge, and similar testimonies are provided now regularly by other large companies adopting cloud-based products from vendors like Google, Salesforce.com, IBM, Cisco and others.

Shell and Advocate Health Care are also announcing on Thursday their adoption of BPOS.

Browse your computer here