Date: 3/31/2009
LAURIE KELLMAN
Associated Press Writer
WASHINGTON (AP) — Democrats in Congress are taking a swipe at credit card issuers and their increasingly creative reasons for raising fees on strapped consumers, sparking a well-financed duel over how to crack down on alleged abuses.
Striking the right balance between getting credit moving again and protecting consumers who depend on it is a long and complex process and nowhere near complete. But lawmakers were hoping to advance consumer-friendly legislation before they head home for Easter at the end of the week and face their constituents – 12.5 million of whom are out of work.
“Right before this break coming up I thought it was a good time to try to deal with it, get it done,” said Senate Banking Committee Chairman Christopher Dodd, D-Conn.
His panel led the way Tuesday by narrowly voting to send the full Senate a bill that would ban some of the many reasons credit card issuers raise interest rates and fees on consumers, raising the hackles of industry advocates who say such limits would ultimately cost consumers more money.
“Making this credit available is a very risky business and the committee’s action today will unfortunately make it harder, not easier, for banks to continue doing so,” said American Bankers Association’s Kenneth J. Clayton.
The answer, according to some Republicans, is prosecuting predatory lenders and requiring issuers to more fully disclose agreements in language that consumers can easily understand. They point out that new rules by the Federal Reserve, designed to accomplish some of the same goals, take effect next year without punishing an industry suffering from the recession or putting credit out of reach for higher-risk borrowers.
“This legislation will take us back to an era when competition was limited, working families who needed help were denied access to credit cards and everyone paid interest rates one-third higher than today’s, regardless of whether they paid their bills on time,” said Rep. Jeb Hensarling of Texas, the top Republican on a House subcommittee that takes up the issue Wednesday.
Democrats rattle off examples of some in the industry that have exploited the needy: The college student or elderly consumer who was offered and accepted lines of credit they plainly could not afford; the economically viable consumer stunned by bigger-than-expected monthly payments, inflated under an obscurely written agreement or for hard-to-understand reasons.
Research released Tuesday by the Pew Safe Credit Cards Project exploring the online offers of the 12 largest credit card issuers — 88 percent of outstanding credit card debt — show that borrowers face tough terms on credit cards.
All 100 percent of those cards allowed the issuer to apply payments “in a manner which, according to the Federal Reserve, is likely to cause substantial monetary injury to consumers,” the research showed. A slightly smaller group — 93 percent — of cards allowed issuers to raise any interest rate at any time by changing the account agreement, Pew said.
“Disclosure is no longer enough. The credit card industry has found ways around disclosure,” said Sen. Chuck Schumer, D-N.Y. “No average consumer can hope to keep up with all the changes that have been made.”
“We should not, however, legislate by anecdote,” warned Sen. Richard Shelby, R-Ala.
Dodd’s bill — similar to the House measure to be considered Wednesday — would force the industry to comply this year with some of the same rules approved by the Fed now slated to take effect in 2010.
Dodd’s proposal, approved by the panel 12-11 on Tuesday, would bar so-called double-cycle billing, when a card issuer computes interest charges on outstanding balances from more than one billing cycle. It also would ban “universal default,” the practice of raising a cardholder’s interest rates when that consumer has problems paying other creditors. And it would prevent card issuers from changing the terms of a contract as long as the card holder pays on time.
Shelby said he supports some of those goals. But he voted against the bill, as did every other Republican on the panel, in part because he said it would prohibit card issuers from pricing according to an existing card holder’s past and potential behavior.
That, Shelby said, would amount to abandoning risk-based pricing altogether.
“All financial transactions should be based on risk. Nothing else,” Shelby said. “Risk, the ability to pay back.”
“But the rates always go up,” Dodd replied. “I don’t know of an example where risk-based pricing has rewarded a consumer.”
___
On the Net:
The Senate bill is S. 414. The House version is H.R. 627. They can be accessed at http://thomas.loc.gov.
Pew Safe Credit Cards Project: http://www.pewtrusts.org/our_work_detail.aspx?id616
Copyright 2009 The Associated Press.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.
Midwest Flooding – No Insurance
Date: 3/29/2009
NATE JENKINS
Associated Press Writers
MOORHEAD, Minn. (AP) — As the Red River crept within view of their backyard this past week, Denette and Billy Narum had an extra incentive to pray their sandbags held. Like most people in the flood zone, they have no flood insurance.
Fewer than 800 homeowners in the North Dakota and Minnesota communities most threatened by the swollen river hold insurance policies covering flood damage despite a decade-long push by state and federal officials to get people signed up, according to federal records obtained by The Associated Press.
Like the Narums, who bought their home five years ago, many forgo the insurance because they have never seen a historic flood. Others don’t want to shell out up to $800 a year for coverage, instead gambling that city dikes will protect their homes.
That leaves residents exposed to huge losses, and they can’t count on a government bailout. People who don’t have insurance can get limited federal help if their county is declared a federal disaster area, but it’s usually in a loan that must be repaid.
“This was never supposed to happen here,” Denette Narum said hours before she and her husband evacuated Friday, giving up on their six pumps as water seeped under sandbags topping a permanent levee and water filled their basement.
About 20 percent of Moorhead residents had been urged to evacuate, although most homes are still OK.
Thousands of volunteers reinforced miles and miles of dikes with sandbags as the river rose to record levels. Even though the National Weather Service said the river appeared to be receding, it was still more than 20 feet above flood stage Sunday and expected to remain that way for days, testing the integrity of dikes that have already suffered some breaches.
Federal Emergency Management Agency reports show that in the besieged city of Fargo, N.D., with a population of 92,000, only 586 homeowners have policies — including just 90 in the area of highest flood risk. In neighboring Moorhead, a city of 30,000, that number is a mere 145.
In fact, only 4,558 homeowners in the entire state of North Dakota and fewer than 9,000 in Minnesota carried flood insurance as of January, the most recent figures available.
FEMA and state officials tried to get the message out about flood insurance after the devastating 1997 Red River flood, which submerged Grand Forks, N.D., and caused an estimated $4.1 billion in damage. Only 743 homeowners in Grand Forks now carry flood insurance.
“Memories are short, and people don’t remember the 1997 flood,” said Butch Kinerney, spokesman for the National Flood Insurance Program, managed by FEMA. “You see it time and time again: People forget the past.”
FEMA doesn’t require people to buy flood insurance unless they’re in a designated flood plain and have a federally backed mortgage.
Butch and Janet Johnson have lived in Fargo for 35 years, just half a block from the Red River, and don’t know any neighbors who have flood insurance. They’ve received a few fliers in the mail but never considered getting a policy.
“Our house is 100 years old and if it’s going to go, they can have it,” Janet Johnson said.
The Narums’ mortgage company didn’t require the insurance, and the previous owner told them there was only an inch of water in the basement during the 1997 flood.
“And that was considered a 100-year flood,” said Billy Narum, who built an earthen berm to protect his home in 2006 after he had to sandbag during late spring floods.
Kathy Beckius’ duplex about a block from the Red River in Moorhead also was untouched by water during the 1997 flooding, so she and her husband decided against flood insurance. On Saturday, Beckius watched river water backing up in nearby storm drains, flooding streets in the area up to 2 feet deep in spots.
“It’s your choice whether you get it or not where we live, and we just chose not to,” she said.
After flooding in Minnesota in 2007, Gov. Tim Pawlenty advocated for a law requiring insurance companies to notify homeowners annually about flood insurance. However, there has been little change in the number of policies in Minnesota since Pawlenty signed the law last May, said Ceil Strauss, who coordinates the flood insurance program for the state.
“For the most part, people just don’t want to spend the money,” Strauss said. “They think they’re safe and don’t believe they’re in a flood plain most of time, even if they are.”
Jeff Klein, North Dakota’s flood insurance coordinator, said some people buy coverage only in years when the risk is high — usually when there’s been a lot of snow — then drop it.
In 1997, more than 12,000 homeowners had flood insurance, Klein said, and he suspects the number of current policies is higher than shown by FEMA data, updated through January. This February, FEMA urged homeowners to buy insurance because of a record snow pack and the 30-day waiting period for a policy to take effect.
Anyone can buy the federal insurance from most private insurance agents, as long as their community participates in the National Flood Insurance Program.
Policies start at under $100 a year, and homeowners can insure the structure, contents or both. The average policy for people in a high-risk flood plain is about $600 to $800 a year.
FEMA officials say they encourage everyone to buy flood insurance, even though people behind levees or dams certified to withstand a 100-year flood — one so big that it has only a 1 percent chance of happening in any given year — aren’t required to.
“People think manmade structures protect them from Mother Nature, but Mother Nature does not pay attention to lines on a map or manmade levees,” Kinerney said. “Insurance is not cheap, but it’s more expensive if you suffer a disaster.”
Tell that to Billy Narum, who has no intention of buying flood insurance after the current flood threat is over. Instead, he said he’ll build a higher berm and maybe get rid of the walk-out basement, assuming he can return home.
“Within three years of paying insurance premiums, I would be able to replace everything I lost anyway,” he said.
___
Associated Press writer Tammy Webber reported from Chicago. Associated Press writers Patrick Condon in Moorhead and James MacPherson in Fargo, N.D., contributed to this report.
__
On the Net:
www.floodsmart.gov.
www.fema.gov/nfip
Copyright 2009 The Associated Press.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.
NATE JENKINS
Associated Press Writers
MOORHEAD, Minn. (AP) — As the Red River crept within view of their backyard this past week, Denette and Billy Narum had an extra incentive to pray their sandbags held. Like most people in the flood zone, they have no flood insurance.
Fewer than 800 homeowners in the North Dakota and Minnesota communities most threatened by the swollen river hold insurance policies covering flood damage despite a decade-long push by state and federal officials to get people signed up, according to federal records obtained by The Associated Press.
Like the Narums, who bought their home five years ago, many forgo the insurance because they have never seen a historic flood. Others don’t want to shell out up to $800 a year for coverage, instead gambling that city dikes will protect their homes.
That leaves residents exposed to huge losses, and they can’t count on a government bailout. People who don’t have insurance can get limited federal help if their county is declared a federal disaster area, but it’s usually in a loan that must be repaid.
“This was never supposed to happen here,” Denette Narum said hours before she and her husband evacuated Friday, giving up on their six pumps as water seeped under sandbags topping a permanent levee and water filled their basement.
About 20 percent of Moorhead residents had been urged to evacuate, although most homes are still OK.
Thousands of volunteers reinforced miles and miles of dikes with sandbags as the river rose to record levels. Even though the National Weather Service said the river appeared to be receding, it was still more than 20 feet above flood stage Sunday and expected to remain that way for days, testing the integrity of dikes that have already suffered some breaches.
Federal Emergency Management Agency reports show that in the besieged city of Fargo, N.D., with a population of 92,000, only 586 homeowners have policies — including just 90 in the area of highest flood risk. In neighboring Moorhead, a city of 30,000, that number is a mere 145.
In fact, only 4,558 homeowners in the entire state of North Dakota and fewer than 9,000 in Minnesota carried flood insurance as of January, the most recent figures available.
FEMA and state officials tried to get the message out about flood insurance after the devastating 1997 Red River flood, which submerged Grand Forks, N.D., and caused an estimated $4.1 billion in damage. Only 743 homeowners in Grand Forks now carry flood insurance.
“Memories are short, and people don’t remember the 1997 flood,” said Butch Kinerney, spokesman for the National Flood Insurance Program, managed by FEMA. “You see it time and time again: People forget the past.”
FEMA doesn’t require people to buy flood insurance unless they’re in a designated flood plain and have a federally backed mortgage.
Butch and Janet Johnson have lived in Fargo for 35 years, just half a block from the Red River, and don’t know any neighbors who have flood insurance. They’ve received a few fliers in the mail but never considered getting a policy.
“Our house is 100 years old and if it’s going to go, they can have it,” Janet Johnson said.
The Narums’ mortgage company didn’t require the insurance, and the previous owner told them there was only an inch of water in the basement during the 1997 flood.
“And that was considered a 100-year flood,” said Billy Narum, who built an earthen berm to protect his home in 2006 after he had to sandbag during late spring floods.
Kathy Beckius’ duplex about a block from the Red River in Moorhead also was untouched by water during the 1997 flooding, so she and her husband decided against flood insurance. On Saturday, Beckius watched river water backing up in nearby storm drains, flooding streets in the area up to 2 feet deep in spots.
“It’s your choice whether you get it or not where we live, and we just chose not to,” she said.
After flooding in Minnesota in 2007, Gov. Tim Pawlenty advocated for a law requiring insurance companies to notify homeowners annually about flood insurance. However, there has been little change in the number of policies in Minnesota since Pawlenty signed the law last May, said Ceil Strauss, who coordinates the flood insurance program for the state.
“For the most part, people just don’t want to spend the money,” Strauss said. “They think they’re safe and don’t believe they’re in a flood plain most of time, even if they are.”
Jeff Klein, North Dakota’s flood insurance coordinator, said some people buy coverage only in years when the risk is high — usually when there’s been a lot of snow — then drop it.
In 1997, more than 12,000 homeowners had flood insurance, Klein said, and he suspects the number of current policies is higher than shown by FEMA data, updated through January. This February, FEMA urged homeowners to buy insurance because of a record snow pack and the 30-day waiting period for a policy to take effect.
Anyone can buy the federal insurance from most private insurance agents, as long as their community participates in the National Flood Insurance Program.
Policies start at under $100 a year, and homeowners can insure the structure, contents or both. The average policy for people in a high-risk flood plain is about $600 to $800 a year.
FEMA officials say they encourage everyone to buy flood insurance, even though people behind levees or dams certified to withstand a 100-year flood — one so big that it has only a 1 percent chance of happening in any given year — aren’t required to.
“People think manmade structures protect them from Mother Nature, but Mother Nature does not pay attention to lines on a map or manmade levees,” Kinerney said. “Insurance is not cheap, but it’s more expensive if you suffer a disaster.”
Tell that to Billy Narum, who has no intention of buying flood insurance after the current flood threat is over. Instead, he said he’ll build a higher berm and maybe get rid of the walk-out basement, assuming he can return home.
“Within three years of paying insurance premiums, I would be able to replace everything I lost anyway,” he said.
___
Associated Press writer Tammy Webber reported from Chicago. Associated Press writers Patrick Condon in Moorhead and James MacPherson in Fargo, N.D., contributed to this report.
__
On the Net:
www.floodsmart.gov.
www.fema.gov/nfip
Copyright 2009 The Associated Press.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.
Groups find common ground on health care overhaul
Date: 3/27/2009
RICARDO ALONSO-ZALDIVAR
Associated Press Writer
WASHINGTON (AP) — Groups often at odds over health care reform — consumers, insurers, doctors, employers — reached a broad agreement Friday that could serve as a starting point for lawmakers trying to overhaul the system.
Although the long-awaited report of the Health Reform Dialogue avoided some of the most contentious issues, the agreement does have the kind of far-reaching support lawmakers will need to meet their goal of passing legislation this year.
“You can bet I’ll be working closely with these groups,” said Senate Finance Committee Chairman Max Baucus, D-Mont., who is trying to find consensus on Capitol Hill.
In their report, the groups said the uninsured should be covered through a mix of expanded government programs and subsidies to purchase private health coverage. They called for savings from making the health care system less wasteful and urged that prevention become the foundation for medical care. Many of their ideas are shared by President Barack Obama and influential lawmakers such as Baucus.
But the five-page proposal was thin on details, starting with how to pay for the plan. And the groups avoided such divisive issues as whether insurers should be forced to compete with a new government-sponsored insurance plan, as Obama has proposed.
Critics minimized the result. “They’ve moved the health care debate forward a few inches,” said Richard Kirsch, director of Health Care for America Now, a grassroots campaign backed by labor.
The 18 groups met for six months. Along the way, two major unions pulled away, but other groups representing seniors, businesses, nurses, drug makers and patients kept talking.
“What the agreement tries to do is achieve a balance for coverage expansion through the two key pillars of health care today,” said Ron Pollack, executive director of Families USA, a liberal advocacy group that stayed in the talks. “One is employer-sponsored private coverage and the other is safety-net coverage.”
Other participants included the National Federation of Independent Business and the health insurance industry, who were instrumental in sinking the last attempt at a health care overhaul in the 1990s. Also in the talks were staunch supporters of guaranteed coverage for all, such as AARP and the American Cancer Society Cancer Action Network.
The Service Employees International Union and the American Federation of State, County and Municipal Employees took part but didn’t sign on to the agreement because some of their concerns could not be satisfied. That underscored the difficulty of getting a health care compromise.
The groups all but endorsed a requirement that every American obtain health insurance. While their agreement avoided the politically loaded term “individual mandate,” it said Congress should “enact reforms necessary so that all individuals will purchase or obtain quality, affordable health insurance.” They avoided the issue of requiring employers to help pay premiums.
The agreement called for a two-prong strategy to cover the estimated 48 million uninsured. First, the Medicaid program should be expanded to cover all adults earning up to the federal poverty level, about $22,000 for a family of four. Then, subsidies or tax credits should be offered to help the middle class.
“I think what this document represents are some tough choices and some very tough consensus,” said Mary Grealy, president of the Healthcare Leadership Council, which represents the medical industry. “It tells Congress: here are some very important components for health care reform that you can now be assured have widespread agreement.”
The groups decided to sidestep the issue of whether to create a government insurance plan to compete with private companies. Many Democrats see that as an essential element of any final compromise. The insurance industry considers it a deal breaker.
The agreement also failed to spell out how to pay for expanded coverage in what is already the world’s costliest health care system. The options lawmakers are considering include taxing some health insurance benefits and limiting tax deductions for high earners, both seen as highly controversial. Independent estimates of the costs range as high as $1.5 trillion over 10 years.
But the agreement did acknowledge that hospitals, doctors, drug companies, insurers and other major elements of the health care system must become more efficient and less wasteful.
The groups will continue to meet as Congress moves ahead on legislation. Their support could prove decisive if a viable compromise does emerge, much as AARP’s backing helped ensure passage of the Medicare prescription drug benefit.
Copyright 2009 The Associated Press.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.
RICARDO ALONSO-ZALDIVAR
Associated Press Writer
WASHINGTON (AP) — Groups often at odds over health care reform — consumers, insurers, doctors, employers — reached a broad agreement Friday that could serve as a starting point for lawmakers trying to overhaul the system.
Although the long-awaited report of the Health Reform Dialogue avoided some of the most contentious issues, the agreement does have the kind of far-reaching support lawmakers will need to meet their goal of passing legislation this year.
“You can bet I’ll be working closely with these groups,” said Senate Finance Committee Chairman Max Baucus, D-Mont., who is trying to find consensus on Capitol Hill.
In their report, the groups said the uninsured should be covered through a mix of expanded government programs and subsidies to purchase private health coverage. They called for savings from making the health care system less wasteful and urged that prevention become the foundation for medical care. Many of their ideas are shared by President Barack Obama and influential lawmakers such as Baucus.
But the five-page proposal was thin on details, starting with how to pay for the plan. And the groups avoided such divisive issues as whether insurers should be forced to compete with a new government-sponsored insurance plan, as Obama has proposed.
Critics minimized the result. “They’ve moved the health care debate forward a few inches,” said Richard Kirsch, director of Health Care for America Now, a grassroots campaign backed by labor.
The 18 groups met for six months. Along the way, two major unions pulled away, but other groups representing seniors, businesses, nurses, drug makers and patients kept talking.
“What the agreement tries to do is achieve a balance for coverage expansion through the two key pillars of health care today,” said Ron Pollack, executive director of Families USA, a liberal advocacy group that stayed in the talks. “One is employer-sponsored private coverage and the other is safety-net coverage.”
Other participants included the National Federation of Independent Business and the health insurance industry, who were instrumental in sinking the last attempt at a health care overhaul in the 1990s. Also in the talks were staunch supporters of guaranteed coverage for all, such as AARP and the American Cancer Society Cancer Action Network.
The Service Employees International Union and the American Federation of State, County and Municipal Employees took part but didn’t sign on to the agreement because some of their concerns could not be satisfied. That underscored the difficulty of getting a health care compromise.
The groups all but endorsed a requirement that every American obtain health insurance. While their agreement avoided the politically loaded term “individual mandate,” it said Congress should “enact reforms necessary so that all individuals will purchase or obtain quality, affordable health insurance.” They avoided the issue of requiring employers to help pay premiums.
The agreement called for a two-prong strategy to cover the estimated 48 million uninsured. First, the Medicaid program should be expanded to cover all adults earning up to the federal poverty level, about $22,000 for a family of four. Then, subsidies or tax credits should be offered to help the middle class.
“I think what this document represents are some tough choices and some very tough consensus,” said Mary Grealy, president of the Healthcare Leadership Council, which represents the medical industry. “It tells Congress: here are some very important components for health care reform that you can now be assured have widespread agreement.”
The groups decided to sidestep the issue of whether to create a government insurance plan to compete with private companies. Many Democrats see that as an essential element of any final compromise. The insurance industry considers it a deal breaker.
The agreement also failed to spell out how to pay for expanded coverage in what is already the world’s costliest health care system. The options lawmakers are considering include taxing some health insurance benefits and limiting tax deductions for high earners, both seen as highly controversial. Independent estimates of the costs range as high as $1.5 trillion over 10 years.
But the agreement did acknowledge that hospitals, doctors, drug companies, insurers and other major elements of the health care system must become more efficient and less wasteful.
The groups will continue to meet as Congress moves ahead on legislation. Their support could prove decisive if a viable compromise does emerge, much as AARP’s backing helped ensure passage of the Medicare prescription drug benefit.
Copyright 2009 The Associated Press.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.
Foreclosures force renting families onto street
Date: 3/18/2009
LOS ANGELES (AP) — Clutching pajamas for her three youngest kids, Janice Johnson straggled into a Skid Row homeless shelter on a recent night, frustrated and weary from another fruitless apartment hunt.
The Midnight Mission was her last resort after being evicted when a bank took over the South Los Angeles building where she’d rented an apartment for years.
“I don’t want to be on the street,” said Johnson, a single mother who lives on welfare. “I’m just trying to keep the kids going to school. With this homeless thing, I’m getting calls that my 8-year-old is sleeping in class.”
The foreclosure crisis is hitting inner-cities hard as landlords default on mortgages in record numbers and foreclosures force tenants into the street. Boarded up apartment buildings have become common on impoverished city blocks while emergency shelters are swelling with mothers with children.
“The doors are busting down with people with this problem,” said Mercedes Marquez, city housing general manager. “And the wave is still coming.”
The problem has grown to such proportions that the City Council recently halted evictions and the city decided to buy empty buildings and designate them as affordable apartments.
Government mortgage company Freddie Mac recently said it would allow homeowners facing foreclosure-related eviction to remain in their homes as renters, while Fannie Mae also has taken similar steps to prevent renters and owners from being thrown out.
Cities across the nation are grappling with the dilemma which is affecting some of their neediest residents.
In Chicago, Cook County Sheriff Thomas J. Dart now requires banks to give tenants four months notice of an eviction. Last year, he blocked foreclosure evictions after seeing renters being summarily tossed out, said spokesman Steve Patterson. Chicago’s number of foreclosure evictions has tripled over the past two years, to more than 4,500 last year.
Boston started sending postcards to tenants advising them of their rights and now requires owners to put a sign on the property advising who the landlord is and a local contact, said Pat Canavan, housing adviser to Mayor Thomas Menino. If tenants don’t have heat, city inspectors are allowed to order heating oil and bill the owner. Meanwhile, the city is exploring purchasing foreclosed buildings.
“The (debt) servicers want these buildings unoccupied but we want them occupied,” Canavan said. “There’s all kinds of fallout from this.”
Housing advocates say they’re seeing the same situation with renting families in cities large and small, urban and suburban, being forced into shelters.
Some evictees are even employed but don’t have the savings for a new apartment or simply can’t find an affordable one.
“We’re now seeing working families in shelters — people are going to work from the shelter and getting kids to school from the shelter,” said Ellen Bassuk, president of the National Center for Family Homelessness.
Evictions are likely to keep rising as job losses sock renters, said Delores Conway, multifamily market expert at the University of Southern California’s Lusk Center for Real Estate.
“The pressure is going to continue because of rising unemployment,” Conway said.
While the nation’s default rate on apartment buildings is still relatively low, it is rising quickly. Fannie Mae, for example, said its delinquency rate was 0.30 percent at the end of last year, double what it was at the end of September, and almost four times the rate at the end of 2007.
In Los Angeles, neighborhoods in the city’s low-income south and central areas are being walloped.
In 2007, buildings containing a total of 1,690 apartments were foreclosed on. In 2008, owners lost buildings containing 4,789 apartments, according to the city housing department.
Marquez said complaints have flooded in to the city from evicted tenants. Tenants rights group Inquilinos Unidos (Spanish for Tenants United) has never seen as many cases of tenant foreclosure evictions as in the past six months, said organizer Silvia Sandoval.
Most evictions stem from banks that don’t want to be landlords after foreclosing on properties, even if they have to forgo rental income. Occupied properties entails hiring a property manager, which is something banks are generally reluctant to do, even in a normal real estate market, said Dustin Hobbs, spokesman for the California Mortgage Bankers Association
“It’s not the business they’re in,” he said. “They want to resell the property free and clear.”
But in many cases, it means tenants who have paid the rent are getting thrown out because the landlord hasn’t paid the mortgage.
On top of that, many tenants complain that landlords are resorting to intimidation to get them out cheaply and quickly. Tenants in rent-controlled apartments must get a 60-day notice to vacate and relocation fees that can total thousands of dollars, Marquez said.
The council is now set to consider an ordinance that would require banks to notify the city of foreclosures so it can contact tenants to advise them of their rights.
Social service agencies are feeling the pressure. Evictions are a chief cause for a spike in families seeking emergency beds this winter, a change from the traditional population of single men.
“The housing crisis is giving us a newer demographic of people experiencing homelessness,” said Orlando Ward, public affairs director of the Midnight Mission, where about 14 families seek cots every night, about 10 more than six months ago.
Accommodations are Spartan. Families, mostly women with a couple children, sleep in a room separate from the men’s area on cots furnished with a thin mattress, sheets and a small pillow. A neighboring room serves as a children’s play area. Doors open at 6:30 p.m., lights are out at 10 p.m. Patrons must be out in the morning by 7 after a light breakfast.
It’s often the only option for working-class renters who have little financial cushion to absorb a setback such as losing an apartment, and whose relatives and friends have limited resources.
Parents with numerous children or teenagers are often forced to split up their families among various places. Most shelters don’t accept adolescent boys, for instance, out of fear of aggressive behavior.
Janice Johnson’s teenage son found a couch at a friend’s house. Other friends and relatives took in her two teenage girls, one with a baby. Johnson then bounced with her three youngest children between a motel room paid for by a social services agency and sleeping in her van until she swallowed her pride and shuffled into the Midnight Mission.
The magnitude of the situation spurred the City Council in December to suspend foreclosure evictions for year.
The source of the apartment-building foreclosures is the same as single-family homes. Many owners of small buildings, which comprise much of the rental housing in low-income neighborhoods, refinanced during the subprime lending boom, often replacing fixed-rate loans with adjustable-rate ones, Marquez said.
When interest rates skyrocketed, landlords found rental income no longer covered the mortgage. More than 95 percent of foreclosed buildings are rent-controlled.
With so many apartments at stake, city officials are exploring a plan to use federal and city money to buy buildings and designate them as housing for low- and moderate-income families.
For couples like Gabriela and Mario Hernandez, who have two kids, the stress is overwhelming. They received a 90-day eviction notice, but they can’t afford the deposit on a new place while they’re still paying $875 in monthly rent.
The owner, they said, hasn’t paid the mortgage since August. If he had been upfront about being in default, they could have saved the rent for a new apartment.
“We just don’t have the resources,” said Gabriela. “Where are we going to go — the street?”
Copyright 2009 The Associated Press.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.
LOS ANGELES (AP) — Clutching pajamas for her three youngest kids, Janice Johnson straggled into a Skid Row homeless shelter on a recent night, frustrated and weary from another fruitless apartment hunt.
The Midnight Mission was her last resort after being evicted when a bank took over the South Los Angeles building where she’d rented an apartment for years.
“I don’t want to be on the street,” said Johnson, a single mother who lives on welfare. “I’m just trying to keep the kids going to school. With this homeless thing, I’m getting calls that my 8-year-old is sleeping in class.”
The foreclosure crisis is hitting inner-cities hard as landlords default on mortgages in record numbers and foreclosures force tenants into the street. Boarded up apartment buildings have become common on impoverished city blocks while emergency shelters are swelling with mothers with children.
“The doors are busting down with people with this problem,” said Mercedes Marquez, city housing general manager. “And the wave is still coming.”
The problem has grown to such proportions that the City Council recently halted evictions and the city decided to buy empty buildings and designate them as affordable apartments.
Government mortgage company Freddie Mac recently said it would allow homeowners facing foreclosure-related eviction to remain in their homes as renters, while Fannie Mae also has taken similar steps to prevent renters and owners from being thrown out.
Cities across the nation are grappling with the dilemma which is affecting some of their neediest residents.
In Chicago, Cook County Sheriff Thomas J. Dart now requires banks to give tenants four months notice of an eviction. Last year, he blocked foreclosure evictions after seeing renters being summarily tossed out, said spokesman Steve Patterson. Chicago’s number of foreclosure evictions has tripled over the past two years, to more than 4,500 last year.
Boston started sending postcards to tenants advising them of their rights and now requires owners to put a sign on the property advising who the landlord is and a local contact, said Pat Canavan, housing adviser to Mayor Thomas Menino. If tenants don’t have heat, city inspectors are allowed to order heating oil and bill the owner. Meanwhile, the city is exploring purchasing foreclosed buildings.
“The (debt) servicers want these buildings unoccupied but we want them occupied,” Canavan said. “There’s all kinds of fallout from this.”
Housing advocates say they’re seeing the same situation with renting families in cities large and small, urban and suburban, being forced into shelters.
Some evictees are even employed but don’t have the savings for a new apartment or simply can’t find an affordable one.
“We’re now seeing working families in shelters — people are going to work from the shelter and getting kids to school from the shelter,” said Ellen Bassuk, president of the National Center for Family Homelessness.
Evictions are likely to keep rising as job losses sock renters, said Delores Conway, multifamily market expert at the University of Southern California’s Lusk Center for Real Estate.
“The pressure is going to continue because of rising unemployment,” Conway said.
While the nation’s default rate on apartment buildings is still relatively low, it is rising quickly. Fannie Mae, for example, said its delinquency rate was 0.30 percent at the end of last year, double what it was at the end of September, and almost four times the rate at the end of 2007.
In Los Angeles, neighborhoods in the city’s low-income south and central areas are being walloped.
In 2007, buildings containing a total of 1,690 apartments were foreclosed on. In 2008, owners lost buildings containing 4,789 apartments, according to the city housing department.
Marquez said complaints have flooded in to the city from evicted tenants. Tenants rights group Inquilinos Unidos (Spanish for Tenants United) has never seen as many cases of tenant foreclosure evictions as in the past six months, said organizer Silvia Sandoval.
Most evictions stem from banks that don’t want to be landlords after foreclosing on properties, even if they have to forgo rental income. Occupied properties entails hiring a property manager, which is something banks are generally reluctant to do, even in a normal real estate market, said Dustin Hobbs, spokesman for the California Mortgage Bankers Association
“It’s not the business they’re in,” he said. “They want to resell the property free and clear.”
But in many cases, it means tenants who have paid the rent are getting thrown out because the landlord hasn’t paid the mortgage.
On top of that, many tenants complain that landlords are resorting to intimidation to get them out cheaply and quickly. Tenants in rent-controlled apartments must get a 60-day notice to vacate and relocation fees that can total thousands of dollars, Marquez said.
The council is now set to consider an ordinance that would require banks to notify the city of foreclosures so it can contact tenants to advise them of their rights.
Social service agencies are feeling the pressure. Evictions are a chief cause for a spike in families seeking emergency beds this winter, a change from the traditional population of single men.
“The housing crisis is giving us a newer demographic of people experiencing homelessness,” said Orlando Ward, public affairs director of the Midnight Mission, where about 14 families seek cots every night, about 10 more than six months ago.
Accommodations are Spartan. Families, mostly women with a couple children, sleep in a room separate from the men’s area on cots furnished with a thin mattress, sheets and a small pillow. A neighboring room serves as a children’s play area. Doors open at 6:30 p.m., lights are out at 10 p.m. Patrons must be out in the morning by 7 after a light breakfast.
It’s often the only option for working-class renters who have little financial cushion to absorb a setback such as losing an apartment, and whose relatives and friends have limited resources.
Parents with numerous children or teenagers are often forced to split up their families among various places. Most shelters don’t accept adolescent boys, for instance, out of fear of aggressive behavior.
Janice Johnson’s teenage son found a couch at a friend’s house. Other friends and relatives took in her two teenage girls, one with a baby. Johnson then bounced with her three youngest children between a motel room paid for by a social services agency and sleeping in her van until she swallowed her pride and shuffled into the Midnight Mission.
The magnitude of the situation spurred the City Council in December to suspend foreclosure evictions for year.
The source of the apartment-building foreclosures is the same as single-family homes. Many owners of small buildings, which comprise much of the rental housing in low-income neighborhoods, refinanced during the subprime lending boom, often replacing fixed-rate loans with adjustable-rate ones, Marquez said.
When interest rates skyrocketed, landlords found rental income no longer covered the mortgage. More than 95 percent of foreclosed buildings are rent-controlled.
With so many apartments at stake, city officials are exploring a plan to use federal and city money to buy buildings and designate them as housing for low- and moderate-income families.
For couples like Gabriela and Mario Hernandez, who have two kids, the stress is overwhelming. They received a 90-day eviction notice, but they can’t afford the deposit on a new place while they’re still paying $875 in monthly rent.
The owner, they said, hasn’t paid the mortgage since August. If he had been upfront about being in default, they could have saved the rent for a new apartment.
“We just don’t have the resources,” said Gabriela. “Where are we going to go — the street?”
Copyright 2009 The Associated Press.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.
Health debate could spur malpractice changes
Date: 3/17/2009
By ERICA WERNER
Associated Press Writer
WASHINGTON (AP) — The Obama administration and key congressional Democrats are taking a hard look at the nation’s medical malpractice system as part of a broader health care overhaul.
“It’s an essential piece for there to be enduring reform, reform that will stick and will get a significant bipartisan vote in the United States Senate,” said Sen. Ron Wyden, D-Ore., who has a bipartisan health bill that includes incentives to get states to enact malpractice reforms.
Reviving the issue could provoke a fierce fight from trial lawyers, who, along with doctors, have the most at stake.
Already the trial lawyers’ lobby is preparing to distribute a brief on Capitol Hill casting medical malpractice as a small cost in the overall health system. The brief cites an Institute of Medicine finding that as many as 98,000 deaths in the U.S. each year result from medical error.
Trial lawyers and their Democratic Senate allies helped kill attempts under the Bush administration to cap punitive and pain and suffering payouts in malpractice lawsuits. The Congressional Budget Office says such caps could have saved the federal government $4.3 billion from 2010-2019.
Capping judgments likely remains a nonstarter.
John McDonough, a top health adviser to Sen. Edward Kennedy, D-Mass., told a conference of urologists this week that doctors must improve quality of care.
“The solution in terms of medical malpractice is not putting arbitrary caps on pain and suffering that discriminate against lower-income folks,” McDonough said.
The urologists responded with a chorus of “boos.”
But many top Democrats and administration officials say something must be done to curb medical malpractice costs to help pay for revamping the nation’s $2.4 trillion health system.
Obama himself told business leaders last week that ideas to save money like “medical liability issues — I think all those things have to be on the table.”
Senate Finance Committee Chairman Max Baucus, D-Mont., cites costs including fast-rising medical malpractice insurance premiums and so-called “defensive medicine” whereby doctors prescribe treatments that may be unnecessary to guard against getting sued if they fail to do so.
There’s agreement from some in the House including Rep. Rob Andrews, D-N.J., who chairs an Education and Labor health subcommittee.
“It’s hard for me to imagine a result that gets to the president’s desk that doesn’t deal with the medical malpractice issue in some way,” Andrews said in an interview Tuesday.
Proposed solutions include alternative dispute resolution, some similar to legislation that Obama co-sponsored with Hillary Rodham Clinton when both were in the Senate in 2005. Their bill would have created a program to allow patients to learn of medical errors and establish negotiated compensation with the offer of an apology.
Baucus has proposed giving states grants to develop alternate litigation, such as “health courts” whose judges have health care expertise.
Both lawyers and doctors say they’re open to alternative dispute ideas.
But “changing the legal system will not make anyone healthier or save one life,” said Linda Lipsen, senior vice president of public affairs at the American Association for Justice.
Meanwhile doctors are calling malpractice reform a top issue in the health reform debate.
“We need meaningful tort reform,” Nancy H. Nielsen, president of the American Medical Association, told Obama health adviser Ezekiel Emanuel at a recent conference.
“Stay tuned,” Emanuel told her.
Copyright 2009 The Associated Press.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.
By ERICA WERNER
Associated Press Writer
WASHINGTON (AP) — The Obama administration and key congressional Democrats are taking a hard look at the nation’s medical malpractice system as part of a broader health care overhaul.
“It’s an essential piece for there to be enduring reform, reform that will stick and will get a significant bipartisan vote in the United States Senate,” said Sen. Ron Wyden, D-Ore., who has a bipartisan health bill that includes incentives to get states to enact malpractice reforms.
Reviving the issue could provoke a fierce fight from trial lawyers, who, along with doctors, have the most at stake.
Already the trial lawyers’ lobby is preparing to distribute a brief on Capitol Hill casting medical malpractice as a small cost in the overall health system. The brief cites an Institute of Medicine finding that as many as 98,000 deaths in the U.S. each year result from medical error.
Trial lawyers and their Democratic Senate allies helped kill attempts under the Bush administration to cap punitive and pain and suffering payouts in malpractice lawsuits. The Congressional Budget Office says such caps could have saved the federal government $4.3 billion from 2010-2019.
Capping judgments likely remains a nonstarter.
John McDonough, a top health adviser to Sen. Edward Kennedy, D-Mass., told a conference of urologists this week that doctors must improve quality of care.
“The solution in terms of medical malpractice is not putting arbitrary caps on pain and suffering that discriminate against lower-income folks,” McDonough said.
The urologists responded with a chorus of “boos.”
But many top Democrats and administration officials say something must be done to curb medical malpractice costs to help pay for revamping the nation’s $2.4 trillion health system.
Obama himself told business leaders last week that ideas to save money like “medical liability issues — I think all those things have to be on the table.”
Senate Finance Committee Chairman Max Baucus, D-Mont., cites costs including fast-rising medical malpractice insurance premiums and so-called “defensive medicine” whereby doctors prescribe treatments that may be unnecessary to guard against getting sued if they fail to do so.
There’s agreement from some in the House including Rep. Rob Andrews, D-N.J., who chairs an Education and Labor health subcommittee.
“It’s hard for me to imagine a result that gets to the president’s desk that doesn’t deal with the medical malpractice issue in some way,” Andrews said in an interview Tuesday.
Proposed solutions include alternative dispute resolution, some similar to legislation that Obama co-sponsored with Hillary Rodham Clinton when both were in the Senate in 2005. Their bill would have created a program to allow patients to learn of medical errors and establish negotiated compensation with the offer of an apology.
Baucus has proposed giving states grants to develop alternate litigation, such as “health courts” whose judges have health care expertise.
Both lawyers and doctors say they’re open to alternative dispute ideas.
But “changing the legal system will not make anyone healthier or save one life,” said Linda Lipsen, senior vice president of public affairs at the American Association for Justice.
Meanwhile doctors are calling malpractice reform a top issue in the health reform debate.
“We need meaningful tort reform,” Nancy H. Nielsen, president of the American Medical Association, told Obama health adviser Ezekiel Emanuel at a recent conference.
“Stay tuned,” Emanuel told her.
Copyright 2009 The Associated Press.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.
NAACP says bank giants steered blacks to bad loans
Date: 3/13/2009
By JESSE WASHINGTON
AP National Writer
The NAACP is accusing Wells Fargo and HSBC of forcing blacks into subprime mortgages while whites with identical qualifications got lower rates.
Class-action lawsuits were to be filed against the banks Friday in federal court in Los Angeles, Austin Tighe, co-lead counsel for the National Association for the Advancement of Colored People, told The Associated Press.
Black homebuyers have been 3½ times more likely to receive a subprime loan than white borrowers, and six times more likely to get a subprime rate when refinancing, Tighe said. Blacks still were disproportionately steered into subprime loans when their credit scores, income and down payment were equal to those of white homebuyers, he said.
Melissa Murray, vice president of corporate communications for Wells Fargo & Co., called the lawsuit “totally unfounded and reckless.” The bank is receiving federal bailout funds.
“We have never tolerated, and will never tolerate, discrimination in any way, shape or form in any of our business practices, products, or services,” Murray said.
HSBC said it does not comment on litigation. “HSBC stands by its fair lending and consumer protection practices, and we are confident that we are treating our customers fairly and with integrity,” said Neil Brazil, vice president for public affairs.
An NAACP member, Amara Weaver of Milwaukee, said she was one of the victims of predatory lending. She bought her first home in 1984, receiving a 6.25 percent fixed-rate mortgage. She says she had a steady job as a human resources director for a social services agency, never missed a mortgage payment and maintained excellent credit.
In 2004, she wanted to buy the house next door for her son to live in. She said the bank promised her a low fixed rate for a $40,000 loan, but at the closing, when reading the fine print, she noticed that the rate was actually 11 percent.
“I was blown away,” said Weaver, an NAACP member. “I didn’t have any choice (but to sign). … It made me feel violated.”
Similar NAACP lawsuits are pending against a dozen other subprime lenders.
“This is systematic, institutionalized racism,” Tighe said. “Once you take out factors relative to income and credit risk, the only difference between the borrowers is the color of their skin.”
Tighe estimated that “tens of thousands” of blacks had been forced into bad loans, but said it was difficult to gauge the scope of the problem because banks keep much of their internal data private. The lawsuits could force banks to divulge closely guarded information, such as how banks can determine the race of a loan applicant and how federal bailout funds are being spent.
The NAACP is seeking reforms from the banks such as increased transparency in the loan process, educational outreach and internal training.
Copyright 2009 The Associated Press.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.
By JESSE WASHINGTON
AP National Writer
The NAACP is accusing Wells Fargo and HSBC of forcing blacks into subprime mortgages while whites with identical qualifications got lower rates.
Class-action lawsuits were to be filed against the banks Friday in federal court in Los Angeles, Austin Tighe, co-lead counsel for the National Association for the Advancement of Colored People, told The Associated Press.
Black homebuyers have been 3½ times more likely to receive a subprime loan than white borrowers, and six times more likely to get a subprime rate when refinancing, Tighe said. Blacks still were disproportionately steered into subprime loans when their credit scores, income and down payment were equal to those of white homebuyers, he said.
Melissa Murray, vice president of corporate communications for Wells Fargo & Co., called the lawsuit “totally unfounded and reckless.” The bank is receiving federal bailout funds.
“We have never tolerated, and will never tolerate, discrimination in any way, shape or form in any of our business practices, products, or services,” Murray said.
HSBC said it does not comment on litigation. “HSBC stands by its fair lending and consumer protection practices, and we are confident that we are treating our customers fairly and with integrity,” said Neil Brazil, vice president for public affairs.
An NAACP member, Amara Weaver of Milwaukee, said she was one of the victims of predatory lending. She bought her first home in 1984, receiving a 6.25 percent fixed-rate mortgage. She says she had a steady job as a human resources director for a social services agency, never missed a mortgage payment and maintained excellent credit.
In 2004, she wanted to buy the house next door for her son to live in. She said the bank promised her a low fixed rate for a $40,000 loan, but at the closing, when reading the fine print, she noticed that the rate was actually 11 percent.
“I was blown away,” said Weaver, an NAACP member. “I didn’t have any choice (but to sign). … It made me feel violated.”
Similar NAACP lawsuits are pending against a dozen other subprime lenders.
“This is systematic, institutionalized racism,” Tighe said. “Once you take out factors relative to income and credit risk, the only difference between the borrowers is the color of their skin.”
Tighe estimated that “tens of thousands” of blacks had been forced into bad loans, but said it was difficult to gauge the scope of the problem because banks keep much of their internal data private. The lawsuits could force banks to divulge closely guarded information, such as how banks can determine the race of a loan applicant and how federal bailout funds are being spent.
The NAACP is seeking reforms from the banks such as increased transparency in the loan process, educational outreach and internal training.
Copyright 2009 The Associated Press.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.
Doubt cast on $50 billion figure in Madoff case
Date: 3/6/2009
By TOM HAYS and LARRY NEUMEISTER
Associated Press Writers
NEW YORK (AP) — Bernard Madoff and $50 billion.
His name and that number have become inseparable in describing the enormity of what has been called the largest white-collar fraud in history. It’s a figure that has helped demonize Madoff and relegate big-time money managers charged in subsequent securities schemes to mere “mini-Madoff” status.
Investigators claim Madoff himself told them that he stole $50 billion, but it is becoming increasingly clear that the number may be as fictitious as the sprawling fraud that he allegedly ran.
A growing number of people involved in the case and outside observers are saying that the actual loss to investors could be far less than the mind-boggling total often treated as fact. The actual number is not known at this point, but some believe it’s less than $20 billion.
“I’d be pulling a number out of the air,” Stephen Harbeck, president of the Securities Investor Protection Corp., told The Associated Press this week when asked how much money he thought was swindled.
Harbeck said he believes the $50 billion estimate is unreliable because it “includes entirely fictitious profits” that Madoff said he brought investors over the years. Even the $17.1 billion that the SEC recorded last year as being held by Madoff Investment Securities LLC — once thought to be the legitimate side of his operation — “does not appear to reflect reality,” he added.
“I think it’s somewhat misleading to say this was a $50 billion scheme because I believe that includes the fictitious profits,” he said Thursday. “If that is the case, and I believe it to be the case, then the real dollars lost would be considerably lower.”
Madoff, 70, was arrested late last year, a day after meeting with his sons and telling them that his secretive investment advisory business was “basically a giant Ponzi scheme,” a criminal complaint said. He “estimated the losses from this fraud to be at least $50 billion,” the complaint said.
The disgraced financier remains under house arrest in his Manhattan apartment while the FBI, the Securities and Exchange Commission and a court-appointed trustee labor to measure the true scope of the fraud. The Securities Investor Protection Corp., an industry-funded organization that steps in when a brokerage firm fails, has been helping process hundreds of claims by investors hoping to recoup losses.
“It’s an unprecedented Ponzi scheme, but the extent of it we’ll know once the claims are filed,” Harbeck said.
It remains unclear how much burned investors will ultimately say they’re owed. They have until July 2 to file claims with the trustee.
A spokesman for a court-appointed trustee overseeing the liquidation of Madoff’s operation said Thursday that so far only about $1 billion in assets have been recovered: $650 million from bank accounts and other financial institutions; $132.3 million securities that have been sold; and $161 million in securities still invested.
In the weeks after Madoff’s arrest, various news organizations and other groups began compiling a list of Madoff losses that totaled around $30 billion. Those estimates were based on a list of institutional and individual investors and how much they lost — sometimes in the billions.
But it’s likely those estimates were based on monthly statements that investigators say were fabricated, said Alan E. Weiner, a partner in Holtz Rubenstein Reminick LLP, a Long Island accounting firm.
The $50 billion “appears to be a number that (Madoff) just threw out,” Weiner said. “It could be the total value on all the fallacious statements. I don’t think it represents the cash that people put in.”
Former SEC head Harvey Pitt agreed that Madoff “probably inflated the amount of money he had under management.” He predicted the actual loss would fall below $17 billion.
“But there’s no question the amounts are probably north of $10 billion and that’s a lot of money by anyone’s reckoning,” he said at a recent forum on the case.
Even $10 billion would eclipse other recent fraud cases. They include that of Florida hedge fund manager Arthur Nadel, accused of bilking investors out of up to $350 million, and Mark Dreier, a prominent lawyer charged with stealing $400 million in a hedge fund scam. Authorities believe Texas billionaire R. Allen Stanford perpetrated an $8 billion investment fraud.
The Nadel case demonstrated the ripple effect of the avalanche of publicity around the purported $50 billion scam: Investigators say Nadel’s crimes were exposed when his partners, spooked by the Madoff case, asked for an independent audit of the defendant’s business.
Similarly, a New Jersey fund manager, James Nicholson, was arrested last week in yet another alleged scheme that fell apart after several leery investors tried to redeem their money. Prosecutors say his fraud could reach $900 million — a size that might have dominated headlines, pre-Madoff.
In Madoff’s case, the portrayal of him as a monster-size fraudster has led to enough fears about his safety that it was his lawyers who first sought 24-hour protection for him while he remains under house arrest.
Some of the heat has even fallen on his lawyer, Ira Sorkin, who said he has referred two death threats against himself to the FBI and has been subjected to more than a dozen vicious e-mails and phone calls.
Ron Kuby, a lawyer who in the 1990s once represented a blind Egyptian sheik charged with trying to overthrow the U.S. government, said the threats come with the territory.
“I’m sorry. I’m playing the world’s smallest violin,” he said. “I used to get hundreds of those. I got actual letters, hundreds of them, and phone calls saying lovely things like, ‘I’m sorry Hitler missed you.’”
Copyright 2009 The Associated Press.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.
By TOM HAYS and LARRY NEUMEISTER
Associated Press Writers
NEW YORK (AP) — Bernard Madoff and $50 billion.
His name and that number have become inseparable in describing the enormity of what has been called the largest white-collar fraud in history. It’s a figure that has helped demonize Madoff and relegate big-time money managers charged in subsequent securities schemes to mere “mini-Madoff” status.
Investigators claim Madoff himself told them that he stole $50 billion, but it is becoming increasingly clear that the number may be as fictitious as the sprawling fraud that he allegedly ran.
A growing number of people involved in the case and outside observers are saying that the actual loss to investors could be far less than the mind-boggling total often treated as fact. The actual number is not known at this point, but some believe it’s less than $20 billion.
“I’d be pulling a number out of the air,” Stephen Harbeck, president of the Securities Investor Protection Corp., told The Associated Press this week when asked how much money he thought was swindled.
Harbeck said he believes the $50 billion estimate is unreliable because it “includes entirely fictitious profits” that Madoff said he brought investors over the years. Even the $17.1 billion that the SEC recorded last year as being held by Madoff Investment Securities LLC — once thought to be the legitimate side of his operation — “does not appear to reflect reality,” he added.
“I think it’s somewhat misleading to say this was a $50 billion scheme because I believe that includes the fictitious profits,” he said Thursday. “If that is the case, and I believe it to be the case, then the real dollars lost would be considerably lower.”
Madoff, 70, was arrested late last year, a day after meeting with his sons and telling them that his secretive investment advisory business was “basically a giant Ponzi scheme,” a criminal complaint said. He “estimated the losses from this fraud to be at least $50 billion,” the complaint said.
The disgraced financier remains under house arrest in his Manhattan apartment while the FBI, the Securities and Exchange Commission and a court-appointed trustee labor to measure the true scope of the fraud. The Securities Investor Protection Corp., an industry-funded organization that steps in when a brokerage firm fails, has been helping process hundreds of claims by investors hoping to recoup losses.
“It’s an unprecedented Ponzi scheme, but the extent of it we’ll know once the claims are filed,” Harbeck said.
It remains unclear how much burned investors will ultimately say they’re owed. They have until July 2 to file claims with the trustee.
A spokesman for a court-appointed trustee overseeing the liquidation of Madoff’s operation said Thursday that so far only about $1 billion in assets have been recovered: $650 million from bank accounts and other financial institutions; $132.3 million securities that have been sold; and $161 million in securities still invested.
In the weeks after Madoff’s arrest, various news organizations and other groups began compiling a list of Madoff losses that totaled around $30 billion. Those estimates were based on a list of institutional and individual investors and how much they lost — sometimes in the billions.
But it’s likely those estimates were based on monthly statements that investigators say were fabricated, said Alan E. Weiner, a partner in Holtz Rubenstein Reminick LLP, a Long Island accounting firm.
The $50 billion “appears to be a number that (Madoff) just threw out,” Weiner said. “It could be the total value on all the fallacious statements. I don’t think it represents the cash that people put in.”
Former SEC head Harvey Pitt agreed that Madoff “probably inflated the amount of money he had under management.” He predicted the actual loss would fall below $17 billion.
“But there’s no question the amounts are probably north of $10 billion and that’s a lot of money by anyone’s reckoning,” he said at a recent forum on the case.
Even $10 billion would eclipse other recent fraud cases. They include that of Florida hedge fund manager Arthur Nadel, accused of bilking investors out of up to $350 million, and Mark Dreier, a prominent lawyer charged with stealing $400 million in a hedge fund scam. Authorities believe Texas billionaire R. Allen Stanford perpetrated an $8 billion investment fraud.
The Nadel case demonstrated the ripple effect of the avalanche of publicity around the purported $50 billion scam: Investigators say Nadel’s crimes were exposed when his partners, spooked by the Madoff case, asked for an independent audit of the defendant’s business.
Similarly, a New Jersey fund manager, James Nicholson, was arrested last week in yet another alleged scheme that fell apart after several leery investors tried to redeem their money. Prosecutors say his fraud could reach $900 million — a size that might have dominated headlines, pre-Madoff.
In Madoff’s case, the portrayal of him as a monster-size fraudster has led to enough fears about his safety that it was his lawyers who first sought 24-hour protection for him while he remains under house arrest.
Some of the heat has even fallen on his lawyer, Ira Sorkin, who said he has referred two death threats against himself to the FBI and has been subjected to more than a dozen vicious e-mails and phone calls.
Ron Kuby, a lawyer who in the 1990s once represented a blind Egyptian sheik charged with trying to overthrow the U.S. government, said the threats come with the territory.
“I’m sorry. I’m playing the world’s smallest violin,” he said. “I used to get hundreds of those. I got actual letters, hundreds of them, and phone calls saying lovely things like, ‘I’m sorry Hitler missed you.’”
Copyright 2009 The Associated Press.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.
Court makes it harder to challenge forest rules
Date: 3/3/2009
WASHINGTON (AP) — The Supreme Court has made it harder to challenge federal regulations governing timber sales and other policies in national forests.
In a 5-4 decision Tuesday, the court says environmental groups cannot pursue a lawsuit against forest regulations that limit public input when environmental impact on a U.S. Forest Service project is expected to be small.
The case concerned a proposal to salvage timber from 238 acres in the Sequoia National Forest in California. A fire in the summer of 2002 burned 150,000 acres. Even though the Forest Service withdrew the proposal, the federal appeals court in San Francisco upheld a nationwide injunction against the regulations.
The government argued that a challenge to the regulations must be tied to a specific project and the court agreed in an opinion written by Justice Antonin Scalia.
The case is Summers v. Earth Island Institute, 07-463.
Copyright 2009 The Associated Press.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.
WASHINGTON (AP) — The Supreme Court has made it harder to challenge federal regulations governing timber sales and other policies in national forests.
In a 5-4 decision Tuesday, the court says environmental groups cannot pursue a lawsuit against forest regulations that limit public input when environmental impact on a U.S. Forest Service project is expected to be small.
The case concerned a proposal to salvage timber from 238 acres in the Sequoia National Forest in California. A fire in the summer of 2002 burned 150,000 acres. Even though the Forest Service withdrew the proposal, the federal appeals court in San Francisco upheld a nationwide injunction against the regulations.
The government argued that a challenge to the regulations must be tied to a specific project and the court agreed in an opinion written by Justice Antonin Scalia.
The case is Summers v. Earth Island Institute, 07-463.
Copyright 2009 The Associated Press.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.