DealBook: After Big Bet, Google Is to Sell Motorola Unit

Larry Page, Google's co-founder and chief executive, likes to talk about "big bets" and "moonshots." But the thing about moonshots is that they can crash into earth.

That appears to be what happened to Motorola Mobility, the cellphone maker owned by Google. The Internet giant announced Wednesday that it would sell Motorola to the Chinese company Lenovo for $2.91 billion, less than two years after paying $12.5 billion to acquire it.

Motorola was Google's biggest acquisition by far and was hailed by the company as an example of the big bets Mr. Page was unafraid to make. Yet Motorola has continued to bleed money, troubling shareholders and stock analysts, and its new flagship phone, the Moto X, did not sell as well as expected.

The deal is not a total financial loss for the extremely wealthy Google. In addition to keeping billions of dollars' worth of patents, it essentially turned Lenovo into a factory for its Android operating system, and also picked up some cash. Still, it is a sign of the fits and starts the company is experiencing as it navigates business in the mobile age, which has upended technology companies of all types.

In addition to using Motorola's patents to defend itself in the mobile patent wars, Google pledged to reinvent mobile hardware with Motorola's new phones, and directly compete with Apple by owning both mobile hardware and software.

Yet while Google's business depends on phones getting into the hands of more people around the world, it benefits from selling the ads on those phones, not the phones themselves. Selling Motorola is an acknowledgment that Google is better off focusing on its core competencies — making software and selling ads — particularly as the profit margins for phones are shrinking over all.

"They make their money from people watching YouTube ads and doing searches," said Colin Gillis, an analyst at BGC Partners. "They don't necessarily need to be the hardware maker."

Still, Google will retain about 15,000 of the 17,000 patents it acquired as part of its original deal for Motorola, and will grant Lenovo a license to use certain ones. Analysts have described the patents as the most valuable part of the acquisition, worth several billion dollars alone because they are firepower for Google to defend its Android mobile operating system.

Though the patents have not proved to be very helpful to Google in patent litigation, they have helped in cross-licensing agreements with other companies, including one Google and Samsung announced on Monday.

Google's share price climbed 2 percent in after-hours trading after the announcement, a day before the company was set to announce its fourth-quarter earnings. "Motorola's been a millstone and a drag on results," Mr. Gillis said. "You're slipping the millstone off your neck."

In midday trading in Hong Kong on Thursday, Lenovo shares were down nearly 8 percent, far outstripping the decline in the overall Hang Seng index.

Lenovo, already the world's biggest PC company, is buying itself a toehold in the fast-growing smartphone business during a worldwide slowdown in PC sales, and overnight brand recognition in the West. In an interview, Wai Ming Wong, Lenovo's chief financial officer, said the deal would feed the company's "PC-plus" strategy.

"The Motorola handset business comes in very nicely to expand our business further," Mr. Wong said.

Motorola, which has a storied history as the maker of the first commercial cellphone, more recently fell behind rivals like Apple and Samsung. Mr. Page announced the deal to acquire Motorola just months after he reclaimed his position as chief executive of Google, and appointed Dennis Woodside, who previously ran Google's sales and operations, as chief executive of Motorola Mobility.

Mr. Woodside said he would focus on just a few new phones instead of the old lineup of dozens. Yet the phones did not sell as well as expected, and Motorola continued to lose money despite drastic cost-cutting.

The decision to buy Motorola was "the extravagance of being a company with over $350 billion in market cap," said Jordan Rohan, an analyst at Stifel Nicolaus. "I'm not sure Motorola was fixable, and growth is much easier to come by on a company that's not a fixer-upper."

Still, Mr. Page said Google remained committed to hardware, a business that it has been entering over the last couple years, most notably with Motorola but also with products like Google Glass and companies like Nest Labs, the maker of smart thermostats and smoke alarms that Google acquired this month for $3.2 billion.

"This does not signal a larger shift for our other hardware efforts," Mr. Page wrote in a blog post. "The dynamics and maturity of the wearable and home markets, for example, are very different from that of the mobile industry."

He also played up the benefits of the sale for Google's Android system, saying that getting rid of Motorola would enable it to focus more on Android and that Lenovo would use Motorola to expand Android globally.

"Lenovo has the expertise and track record to scale Motorola into a major player within the Android ecosystem," Mr. Page said.

It is unclear exactly how much money Google lost on the Motorola deal over all. In addition to the patents Google is keeping, Google sold Motorola Home, the portion of the business that made set-top boxes, to Arris in 2012 for $2.35 billion. Motorola also had $2.9 billion cash on hand when Google bought it.

Google is also retaining a small division working on cutting-edge technologies, led by Regina Dugan, who was hired from the government's Defense Advanced Research Projects Agency.

"On the heels of buying Nest and buying all these robotics companies, it makes you worry that they're destroying capital," Mr. Gillis said. "But that's what big bets are — some things you lose and this is a losing bet."

Lenovo appears to be building a comprehensive business in computers. Once known primarily as a maker of personal computers, last week Lenovo paid $2.3 billion for a big part of the computer server business of IBM.

Lenovo's shopping spree may be driven by the necessity of moving into other markets. Last year, the world PC market contracted by 10 percent, to 314.5 million units, according to the International Data Corporation.

In the smartphone market, Apple and Samsung have taken share from almost all other suppliers. In its home country, Lenovo may be concerned about the rise of local smartphone manufacturers.

"It makes strategic sense for both Google and Lenovo," said Andrew Costello, a principal at IBB Consulting. "It will give Lenovo a strong brand in the mobile space outside of China that they don't have today, and it gives them deep operator relationships with AT&T and Verizon. And for Google, they're able to focus on the services side, which is what they're best at, and retain the patent holdings."

Quentin Hardy contributed reporting from San Francisco, Michael J. de la Merced from New York and Eric Pfanner from Tokyo.

---

This post has been revised to reflect the following correction:

Correction: January 29, 2014

An earlier version of this article misspelled the name of a market research firm. It is NPD Group, not NDP Group.

A version of this article appears in print on 01/30/2014, on page A1 of the NewYork edition with the headline: After Big Bet, Google to Sell Motorola Unit .

13.07 | 0 komentar | Read More

Well: Study Adds to Concerns About Cardiac Risks for Older Men Taking Testosterone

A large new study found that prescription testosterone raised the risk of heart attacks in older men and in middle-aged men with a history of heart disease, prompting some experts on Wednesday to call for more extensive warning labels on the drugs.

The new study is one of several in recent years that have highlighted cardiac problems as a potential side effect of testosterone gels, patches, pellets and injections. The hormone is approved for low testosterone levels and is widely marketed for symptoms of "low T," including fatigue, low libido and loss of energy. Sales in the last decade have soared.

By itself, the new study, which was not a randomized trial, the gold standard in medical research, "may not tell us very much," said Dr. Michael Lauer, the director of cardiovascular sciences at the National Heart, Lung and Blood Institute, who was not involved in the study. "But when you put this together with the rest of the medical literature, this tells us that we potentially have a problem."

The drugs carry no mention of an increased risk on their labels or in their advertising materials, said Dr. Sidney M. Wolfe, a senior adviser to the Washington advocacy group Public Citizen. "Given that there have been several studies now, I don't see how the Food and Drug Administration can justify having no warnings of heart attacks at all," he said.

In a statement, Andrea Fischer, an F.D.A. spokeswoman, said the agency was reviewing the new findings. "We will communicate any new safety information on testosterone products when our reviews of all new information have been completed," she said.

The new study, published on Wednesday in the journal PLoS ONE and funded by the National Institutes of Health, tracked about 56,000 older and middle-aged men around the country who were prescribed testosterone between 2008 and 2010. The study looked specifically at their rate of heart attacks in the year before receiving their new prescriptions, and in the three months after.

Men 65 and older had double the rate of heart attacks in the months after starting the drug, as did those younger than 65 with a previous diagnosis of heart disease. There was no evidence of greater risk in the younger men without a history of heart problems.

One question surrounding testosterone is whether any potential increase in cardiac risk is caused directly by the drug, or by its impact on behavior. Testosterone boosts libido, for example, which may spur older men to engage in strenuous sexual activity.

The new study sought to address this question by comparing the men using testosterone to a separate group of 170,000 older and middle-aged men who filled prescriptions for Viagra and Cialis. Those men did not experience more heart attacks. The new research was led by a team at the National Cancer Institute, the University of California, Los Angeles, and Consolidated Research, an independent research firm specializing in epidemiology.

In November, a study in The Journal of the American Medical Association found that older men, many with a history of heart disease, had a nearly 30 percent increase in mortality, heart attacks and stroke after using testosterone. And in 2009, a federally financed, randomized study that was intended to test whether testosterone gel could help elderly men build muscle and strength was halted early because of heart attacks and other cardiac problems in men using the drug.

Testosterone increases the production of red blood cells, which can clump together or coagulate, essentially making blood thicker, said Mary Schooling, a professor of public health at Hunter College who published a large study linking testosterone use to cardiovascular events last year. That may be especially hazardous in men who have narrowed arteries because of aging and disease. "There is a potential for harm, and people should know about this," she said.

Although testosterone levels naturally decline with age, testosterone therapy is approved for use only in men with hypogonadism, an underlying endocrine disorder that typically results in a severe testosterone deficiency. Making that diagnosis requires doing a blood test. But studies show that nearly a quarter of men prescribed the drug do not have their levels tested.

Dr. Peter J. Snyder of the University of Pennsylvania School of Medicine, who is leading a $50 million series of trials looking at testosterone treatment in men 65 and older with documented low levels, cautioned against drawing conclusions based on the new study.

"We don't know if these findings apply to men who have low testosterone and meet the criteria for a prescription, or if it applies only to men who have normal levels and then take testosterone in addition," he said.

Dr. Snyder said he and his colleagues found it plausible that testosterone might actually protect against heart disease, in part by reducing body fat and improving blood sugar metabolism.

But, he added, the sharp rise in such prescriptions in the last decade was evidence that many men without testosterone deficiencies were receiving them. "In those cases, there is no medical reason for it," he said, "and that runs counter to all guidelines for physicians."

13.07 | 0 komentar | Read More

The Carpetbagger: Academy Rescinds Song Nomination for ‘Alone Yet Not Alone’

LOS ANGELES—The Academy of Motion Picture Arts and Sciences said its governors had voted to rescind an Oscar nomination for the song "Alone Yet Not Alone," from the movie of the same title, because one of its creators, Bruce Broughton, had improperly advised fellow members of the Academy's music branch that he was in the running for a nomination.

The song received the only nomination for "Alone Yet Not Alone," an independent film from Enthuse Entertainment about sisters captured by Native Americans in the 18th century. The music was written by Mr. Broughton, a seasoned Hollywood composer, and with lyrics by Dennis Spiegel.

In a statement on Wednesday, a day after the decision, the Academy said Mr. Broughton, who was previously an Academy governor and serves on the executive committee of the group's music branch, had emailed branch members during nominations voting, "to make them aware of his submission."

In a Tuesday-night meeting, the statement said, Academy governors determined that the communication violated rules on promotion. "No matter how well-intentioned the communication, using one's position as a former governor and current executive committee member to personally promote one's own Oscar submission creates the appearance of an unfair advantage," Cheryl Boone Isaacs, the Academy's president, said in the statement.

In a statement, Mr. Broughton stopped far short of acknowledging a rules violation, and blamed unnamed rivals for the rescission.

"I'm devastated," Mr. Broughton said. He added: "I indulged in the simplest grass-roots campaign and it went against me when the song started getting attention. I got taken down by competition that had months of promotion and advertising behind them. I simply asked people to find the song and consider it."

The rescission left four Oscar nominees in the song category: "Happy," from "Despicable Me 2"; "Let It Go," from "Frozen"; "The Moon Song," from "Her"; and "Ordinary Love," from "Mandela: Long Walk to Freedom."

The "Alone Yet Not Alone" nomination had earlier been examined for possible violation of a rule that sets a minimum advertising standard for the release of an Oscar-qualifying film, but it had survived that challenge.

The revocation was an unusually strong step for the Academy. In 2010, when Nicolas Chartier, a producer of "The Hurt Locker," was found to have improperly campaigned against a rival, "Avatar," Mr. Chartier was barred from the Oscar ceremony. But his film remained qualified, and went on to win the best picture Oscar.

13.07 | 0 komentar | Read More

DealBook: Bitcoin Figure Is Accused of Conspiring to Launder Money

One of the most prominent players in the Bitcoin universe, Charles Shrem, was arrested by federal authorities on Sunday and accused of helping smooth the way for drug transactions on the now-defunct online bazaar Silk Road.

Mr. Shrem was a co-founder and chief executive of a popular website, BitInstant, where Bitcoins could be bought using dollars. At the age of 24, Mr. Shrem was a regular speaker on the Bitcoin convention circuit, and was also on the board of the Bitcoin Foundation, a nonprofit organization that educates the public on digital money.

The criminal charges unsealed on Monday by the United States attorney's office in Manhattan claim that Mr. Shrem used his company to knowingly convert money into virtual currency for people interested in buying narcotics on the Silk Road site. He was also accused of personally buying drugs on the site. According to the complaint, the scheme was operated in cooperation with another man, Robert Faiella, known as BTCKing, who was arrested on Monday in Florida.

The case is already causing discomfort in Bitcoin circles, where the line between legal and illegal enterprises has long been somewhat blurry, hindering public acceptance of digital money. The price of Bitcoin dropped after the announcement of the arrests on Monday, and was down over 7 percent in the evening to around $810.

Even as the popularity of virtual currencies has exploded — the price of a single Bitcoin is up over 5,000 percent in the last year — government officials have not yet come up with clear regulation governing the use of virtual currencies under the law. That fact has made it easier for theft and fraud to occur even on legitimate websites.

BitInstant appeared to be firmly in the camp of legitimate virtual currency businesses earlier this year. The company won the backing of Winklevoss Capital Management, which is run by the Winklevoss twins, who were early players in Facebook.

After the arrests, the Winklevoss brothers put out a statement saying that they "are obviously deeply concerned about his arrest," and "support any and all governmental efforts to ensure that money-laundering requirements are enforced."

The brothers also said that they "look forward to clearer regulation being implemented on the purchase and sale of Bitcoins."

The issue is likely to come up on Tuesday at the beginning of a two-day hearing on how regulators should deal with Bitcoin, organized by the New York State superintendent of financial services, Benjamin M. Lawsky. The Winklevoss brothers are both scheduled to testify.

When the Silk Road website was shut down last year, many Bitcoin fans cheered, arguing that the action was important in stamping out the illegal activity that had thrived in the early days of Bitcoin. Since then, the price of Bitcoin has risen and many mainstream investors have expressed interest in the currency's possibilities.

But Mr. Shrem's arrest may again raise questions about the distance between the legal problems in Bitcoin's past and its legitimate financial opportunities.

The complaint unsealed on Monday suggested that Mr. Shrem and his business partners were themselves grappling with what was and was not allowed.

When a co-founder of BitInstant asked Mr. Shrem why he was working with someone with such clear affiliation with Silk Road, Mr. Shrem wrote in an email in 2012 that, "he has not broken a law and Silk Road itself is not illegal," according to the complaint. Mr. Shrem added, "We make good profit from him."

The United States attorney in Manhattan, Preet Bharara, said in a statement on Monday, "We will aggressively pursue those who would co-opt new forms of currency for illicit purposes."

Mr. Shrem and Mr. Faiella were both charged with conspiring to launder money, and Mr. Shrem was also charged with "willfully failing to file any suspicious activity report" about Mr. Faiella's work.

BitInstant stopped operating last summer for reasons that remain unclear. Customers later filed suit against the company, claiming that the company misrepresented its services, and sought class-action status. But the site was viewed as a pioneer in the industry, and Mr. Shrem recently said that he planned to restart it.

Mr. Shrem has also been an outspoken champion of the virtual currency. On the day he was arrested, he was scheduled to be a featured speaker at the North American Bitcoin Conference in Miami. He was arrested at John F. Kennedy International Airport.

On Monday, Mr. Shrem was still listed as a member of the Bitcoin Foundation's board.

"We are surprised and shocked by the news today," a spokeswoman for the foundation, Jinyoung Englund, said. "As a foundation, we take these allegations seriously and do not condone illegal activity."

13.07 | 0 komentar | Read More

DealBook: Anxiety Rising Over Relations Between Japan and China

DAVOS, Switzerland — Even with all the optimism about the global economy here last week at the annual meeting of the World Economic Forum, there was a remarkable economic and political risk that appeared to have been largely overlooked: The long-simmering battle between China and Japan may be close to boiling over. One top executive went so far as to describe the nations' relationship as a "stealth war."

The implications for the global economy — and some of the largest multinational companies — are profound. China and Japan represent the second- and third-largest economies in the world, after the United States, and they are among each other's largest trade partners. General Motors, Microsoft, Boeing, Nike, Coca-Cola and Procter & Gamble, among others, have huge businesses in both countries.

"I probably spoke to no less than 40 U.S. C.E.O.'s here and I would say this issue came up in more than half of those conversations," said Ian Bremmer, the political scientist who founded the Eurasia Group, the political risk consulting firm. "This week at Davos, for me, the big takeaway was that China-Japan was much more problematic than we thought. The possibility that you get anti-Japanese sentiment in a big way and it causes real disruption on trades and hurting both economies is real."

If you need evidence of the significance of this geopolitical clash, look no further than the surprising comment made here by Prime Minister Shinzo Abe of Japan, who said his country's relationship with China was in a "similar situation" to the one between Germany and Britain before World War I.

Mr. Abe was trumped by Wu Xinbo, a Chinese university dean who is considered close to China's leadership, when he described Mr. Abe as a "troublemaker" and, at one point, compared him, somewhat obliquely, to Kim Jong-un, the North Korean dictator.

"I have to say that the political trust between the two countries now is very low," Mr. Wu said, suggesting that he expects "political relations between our two countries will stay very cool, even frozen, for the remaining years of the Abe administration in Japan."

Problems between China and Japan have long been festering, especially as Mr. Abe has sought to rewrite the country's Constitution and build the country's military, which has long been considered only defensive.

Tensions rose when China angered Japan last November when it claimed an air defense identification zone over a chain of islands in the East China Sea that the countries have disputed claims over. The conflict increased after Mr. Abe visited the Yasukuni Shrine, where Japanese war dead are commemorated, including several war criminals who were executed after Japan's defeat in World War II. The trip offended many Chinese, and the Obama administration had warned Mr. Abe not to visit the shrine.

China-Japan political relations have been strained since the end of World War II. Previous visits by Japanese politicians have angered China and South Korea, which both suffered greatly under Japan's empire-building efforts then. And the Japanese citizenry has often sought to distance itself from its imperialist past, preferring instead to highlight the nation's economic progress and prowess.

Yet now, the intensity of the feelings of mutual distrust is striking. According to Pew Research, just 1 in 20 Japanese "have a favorable attitude toward China" and "anti-Japan sentiment is quite strong in China, where 90 percent of the public has an unfavorable opinion of Japan."

The latest tensions are having a direct economic impact; the Japanese, for example, are investing less in China.

Mr. Bremmer, of the Eurasia Group, put it bluntly: "The Chinese have written off Shinzo Abe as someone they can potentially work with. They mistrust him completely. They believe he is belligerent toward them and believe an escalatory policy is the appropriate one to pursue."

After Mr. Abe made his comment comparing his country's relationship as being similar to Britain and Germany in 1914, when the two countries were major trading partners, China's leaders made their own attacks. "Rather than using pre-World War I Anglo-German relations, why don't you deeply examine your mistakes during the First Sino-Japanese War, the Japanese colonial rule of the Korean Peninsula and the fascist war that Japan launched on victim countries in World War II?" Qin Gang, a spokesman for China's foreign ministry, asked of Mr. Abe.

Mr. Abe, in fairness, did try to play down any hints that the simmering tensions would lead to a prolonged military conflict.

"Japan has sworn an oath to never again wage a war," Mr. Abe said in his speech. "We have never stopped, and will continue to be wishing for the world to be at peace."

But that's not what many of the executives and regulators I spoke to after his presentation took away from his comments. "I'm going to be asking our teams in China and Japan to do a full analysis of the risks to our business when I get home," one Fortune 500 C.E.O. told me, seeming anxious. "Maybe this should have been on my radar before, but it is now."

So what's the biggest risk?

"The possibility of a mistake where someone gets killed is going up," Mr. Bremmer said. "They are scrambling their fighters in the East China Sea every day."

And the misunderstandings could deepen. "More problematically, the aftermath of a mistake will have both countries actively mistrusting the intentions of each other without a mechanism to really talk to each other and without the Americans acting as an interlocutor," Mr. Bremmer said.

Mr. Wu said that the possibility of war was overstating the case: "China doesn't want to fight a war."

One of the greatest challenges multinational companies doing business in the region may face is that the United States government may not be positioned to step into the middle of the debate. Many of the American officials who were closest to Japan have left the Obama administration. Hillary Rodham Clinton, Kurt Campbell and Tom Donilon — all known for being the architects of President Obama's "pivot" toward Asia — are no longer there, nor is Timothy F. Geithner, who worked in Japan in the 1990s and had close relationships with many senior leaders.

"Kerry doesn't really do Asia," Mr. Bremmer said about Secretary of State John Kerry, who would most likely take umbrage at that assertion. "Susan Rice? No," he said of the United States ambassador to the United Nations.

"Who is paying attention to foreign policy in Obama-land or in Congress? Nobody." Whether that is true or not, it is clear that China, long seen as a fast-growing economy, and Japan, which has experienced a rebound in the last year, now should be added to the list of political and economic risks that businesses should consider in 2014.

---

Andrew Ross Sorkin is the editor at large of DealBook. Twitter: @andrewrsorkin

13.07 | 0 komentar | Read More

DealBook: Justice Department Inquiry Takes Aim at Banks’ Business With Payday Lenders

Federal prosecutors are trying to thwart the easy access that predatory lenders and dubious online merchants have to Americans' bank accounts by going after banks that fail to meet their obligations as gatekeepers to the United States financial system.

The Justice Department is weighing civil and criminal actions against dozens of banks, sending out subpoenas to more than 50 payment processors and the banks that do business with them, according to government officials.

In the new initiative, called "Operation Choke Point," the agency is scrutinizing banks both big and small over whether they, in exchange for handsome fees, enable businesses to illegally siphon billions of dollars from consumers' checking accounts, according to state and federal officials briefed on the investigation.

The critical role played by banks largely plays out in the shadows because they typically do not deal directly with the Internet merchants. What they do is provide banking services to third-party payment processors, financial middlemen that, in turn, handle payments for their merchant customers.

Yet the crackdown has already come under fire from congressional lawmakers, including Representative Darrell Issa, the Republican from California who heads the House Oversight Committee, who have accused the Justice Department of trying to covertly quash the payday lending industry.

In the first action under Operation Choke Point, Justice Department officials brought a lawsuit this month against Four Oaks Bank of Four Oaks, N.C., accusing the bank of being "deliberately ignorant" that it was processing payments on behalf of unscrupulous merchants — including payday lenders and a Ponzi scheme. As a result, prosecutors say, the bank enabled the companies to illegally withdraw more than $2.4 billion from the checking accounts of customers across the country.

The lawsuit, which includes reams of internal bank documents, offers the most vivid look yet at how some senior bank executives brushed off warning signs of fraud while collecting hundreds of thousands of dollars in fees. While the bank has reached a tentative $1.2 million settlement with federal prosecutors, the impact of the lawsuit extends far beyond Four Oaks, and federal prosecutors say this points to a problem rippling fast across the banking industry.

Banks are required under the Bank Secrecy Act, a federal law that requires banks to maintain internal checks against money laundering, to thwart suspicious activity by thoroughly examining both their customers and the companies their customers do business with. But until recently, they have largely escaped scrutiny for their role providing financial services to the payment processors.

The new, more rigorous oversight could have a chilling effect on Internet payday lenders, which have migrated from storefronts to websites where they offer short-term loans at interest rates that often exceed 500 percent annually. As a growing number of states enact interest rate caps that effectively ban the loans, the lenders increasingly depend on the banks for their survival. With the banks' help, the lenders that typically work with a third-party payment processor that has an account at the banks are able, authorities say, to automatically deduct payments from customers' checking accounts even in states where the loans are illegal.

Short-term lenders argue that the loans, when used responsibly, can provide vital credit for a whole swath of borrowers largely frozen out of the traditional banking services, while state law enforcement officials say that the lenders still have to abide by state restrictions aimed at shielding residents.

And the payday industry has its defenders. Representative Issa has begun an investigation into Operation Choke Point, according to a letter addressed to Attorney General Eric H. Holder Jr.

In the January letter — a copy of which was reviewed by The New York Times — Mr. Issa accused the Justice Department of trying to "eliminate legal financial services to which the department objects."

So far, it is unclear whether those objections will be enough to stifle the Justice Department's investigation. But the assistant United States attorney who led the investigation is scheduled to leave the investigations in February, according to several people with direct knowledge of the matter, and the Justice Department is not extending his detail. Other lawyers within the agency are working on separate investigations related to Choke Point. The Justice Department declined to comment on the investigation, but people with knowledge of the matter say that the agency is fully committed to the project.

Some victims of unscrupulous payday lenders are pointing fingers at banks, arguing that without the aid of Four Oaks and banks like it, they never would have been plunged deep into debt by the costly loans.

James Dillon of Trinity, N.C., contends that payday lenders ransacked his checking account at Wells Fargo. A handful of the loans that Mr. Dillon, 36, took out to buy Christmas presents for his children in 2012 and 2013 — some with interest rates beyond 1000 percent — came from lenders routing payments through Four Oaks, according to a copy of his bank statements reviewed by The Times.

"Without the access from the banks, it would be nearly impossible for these lenders to operate outside the U.S. regulatory system," said Stephen Six, a former Kansas attorney general who is part of a team of lawyers representing Mr. Dillon and other plaintiffs in lawsuits against banks over their role in processing transactions on behalf of payday lenders.

Within Four Oaks, some executives started to suspect early on that many online lenders were extending expensive credit without being licensed in the states where borrowers lived, according to the internal emails and other documents filed in connection with the lawsuit against the bank.

Bankers shrugged off evidence, even direct warnings from law enforcement officials, that their lender clients were violating state law, prosecutors say. In December 2012, for example, Arkansas's attorney general, Dustin McDaniel, sent a letter to Four Oaks and a payday lender routing payments through the bank, accusing the company of illegally making loans to residents in his state.

The Arkansas attorney general was not the only one complaining. Between January 2011 and August 2012, Four Oaks received hundreds of complaints from banks across the country whose customers said they had never authorized merchants to withdraw money from their accounts, court records show.

Such high rates of return — the percentage of total payments returned because of lack of authorization or insufficient funds — stood out. In 2012, more than half of the payments that one Internet merchant was routing through Four Oaks were returned, a rate more than 40 times the industry standard.

The motive for tolerating such high returns, prosecutors say, was clear: outsize profits. The more questionable the merchant, the greater fees Four Oaks stood to collect, prosecutors say.

Every time consumers spot an unauthorized withdrawal and request money back, the bank makes money to process the return. And fees for processing returns, according to prosecutors, can dwarf the fees Four Oaks earned for processing the original withdrawals.

Still, the high return rates did trouble some bank executives. The problem, one banker explained in an email, was that such staggering rates imply "we don't know our customers and we don't do due diligence and risk grade them properly."

Yet the bank chose to keep handling transactions for the lender, court records show.

While examining another company, Rex Ventures, bankers at Four Oaks learned that one of the investment firm's top executives was using a false Social Security number and that an address for the company's headquarters turned out to be a "vacant lot," court documents show.

Still, that was not enough to dissuade Four Oaks from allowing Rex Ventures to process payments through its accounts. By August 2012, the Securities and Exchange Commission shut down Rex Ventures, accusing the company of duping investors out of $600 million.

In an email included in the lawsuit, one executive said: "I'm not sure 'don't ask, don't tell' is going to be a reasonable defense, if a state comes after one of our originators."

13.07 | 0 komentar | Read More

ArtsBeat: Grammy Awards 2014 Live Blog

Dave Itzkoff and Jon Caramanica live-blogged the ceremony, which saw major awards go to the French dance music duo Daft Punk and the upstarts Macklemore & Ryan Lewis and Lorde.

11:45 P.M. Final Thoughts

Dave Itzkoff: Any closing wisdom, Jon? Once you got past those early Macklemore wins, was there anything that restored your faith in the system? Like this UCasino.com advertisement set to "Can't Hold Us"? It seems like a million years ago, but the Beyoncé/Jay Z performance that opened the show was a highlight for me, as was Lorde's live rendition of "Royals," and an all-too-short duet between Carole King and Sara Bareilles. I assume you agree with me 100 percent.
Jon Caramanica: Strangely enough, I do!
Dave Itzkoff: WHAT?
Jon Caramanica: The show was extremely front-loaded, I thought, but I would think that, being the type of person who thinks seeing Paul McCartney behind a psychedelic piano is something you do in a museum.
Dave Itzkoff: Well, thank you for taking the plunge with me and getting married to Macklemore's performance. I don't think we'll ever forget it.
Jon Caramanica: Two themes stand out — Daft Punk, of course, a reminder that you, too, can win oodles of Grammys if you'd just spend a couple million bucks making sure your album sounds like a 1977 cutout record. And two, the youth wave, such as it is, with Lorde and Macklemore & Ryan Lewis, two white artists who piggybacked onto mainstream hip-hop, threw stones at it from above, and rode off to fame.
Dave Itzkoff: Where does Paul Williams fit into your careful thesis?
Jon Caramanica: In fairness, I would have taken Paul Williams behind a psychedelic piano.
Dave Itzkoff: Throw in Kermit the Frog and I'm right there with you.

11:41 P.M. Lindsey Buckingham Joins Queens of the Stone Age

Dave Itzkoff: You had me at Queens of the Stone Age, lost me at Lindsey Buckingham. This show is over, yes?
Jon Caramanica: But Rock is alive!
Dave Itzkoff: This is like three mash-ups too far. Mashes-up?
Jon Caramanica: At least Skrillex isn't in this.
Dave Itzkoff: True! Where was the EDM representation in all this?
Jon Caramanica: I can only hope Avicii is somewhere D.J.-ing for $350,000 tonight.
Dave Itzkoff: I was literally trying to fav your comment.

11:33 P.M. Daft Punk Wins Album of the Year

Dave Itzkoff: HOW CAN THEY HAVE THIS MANY PEOPLE STILL TO COME? They're already two minutes over, by my count. Oh thank you, Lorde. I think we're in the home stretch.
Jon Caramanica: What a bizarre set of nominees for Album of the Year.
Dave Itzkoff: Unexpected winner as well? It wasn't Taylor Swift, and it wasn't Macklemore.
Jon Caramanica: I'd have to say, given how well Macklemore did, and the playing field they gave him, this is a surprise, but Daft Punk speaks directly to out-of-touch voters. Hell, a couple dozen of them played on this album!
Dave Itzkoff: "This is the most insane thing ever" — Nile Rodgers.
"Back when I was drinking, I used to imagine things that weren't there … then I got sober and two robots called me to make an album" Paul Williams.
Jon Caramanica: Paul Williams very turnt up tonight.

11:27 P.M. Billie Joe Armstrong and Miranda Lambert Perform

Dave Itzkoff: Good for Billie Joe Armstrong and Miranda Lambert, but where is Norah Jones?
Jon Caramanica: You can't book Blake Shelton without booking Miranda — it's a fact. Look it up.
Dave Itzkoff: I thought that was a nicely handled in memoriam.
Jon Caramanica: All told, yes, except that it seems that they misspelled Cory Monteith's name?
Dave Itzkoff: No. Uh oh. Oh they did. "Montieth."

11:22 P.M. Recognizing Music Teachers

Dave Itzkoff: NEIL PORTNOW! NOW IT'S ON.
Jon Caramanica: John Legend got to weep on camera for a long time before because he agreed to shill for Portnow.
Dave Itzkoff: In fairness they were introducing a new Grammy award for music instructors, which this went to Kent Knappenberger, a teacher in rural New York. And his beard puts Portnow's to shame.
Jon Caramanica: This is a great thing to have at 11:20 p.m.

11:06 P.M. Macklemore Requests the Honor of Your Presence …

Dave Itzkoff: Here we go. Greatest meme in the history of the Internet, coming up. And Madonna slipping in a chorus of "Open Your Heart."
Jon Caramanica: WHAT, WHAT, WHAT IS HAPPENING? This is easily peak insanity at the Grammys.
Jon Caramanica: To recap: Madonna is dressed as an evil sheriff from "Justified" and is singing an art-song version of "Open Your Heart" after 33 couples got married to a Macklemore & Ryan Lewis Song under the watchful eye of Queen Latifah. Did I miss anything?
Dave Itzkoff: I think they got the stained glass on discount from Nicki Minaj's stage show.
Jon Caramanica: Stained plexiglass. Every part of that was face-melting. Better than 100 Lang Lang / Metallica mash-ups.

11:01 P.M. Impending Nuptials?

Dave Itzkoff: I believe we were promised a mass wedding. Where is it?
Jon Caramanica: Did you say Red Wedding?
Dave Itzkoff: Oh my god seriously. Ah — here it comes!

11:00 P.M. Daft Punk Wins Record of the Year

Dave Itzkoff: Daft Punk wins for "Get Lucky." That category was impossible to call. Daft Punk definitely a favorite, but so were Robin Thicke and Lorde, I thought.
Jon Caramanica: Yes this was a toss-up, but Daft Punk is going to beat out Robin Thicke every time when it comes to nostalgia-minded voters.

Dave Itzkoff: Jon, on a scale of 0 to 1, how psyched are you for Metallica and Lang Lang?
Jon Caramanica: Totally 1. I believe in schadenfreude. Think of all the art Lars Ulrich is gonna sell to Lang Lang.
Dave Itzkoff: No idea what this is doing in the show. I see Kirk [Hammett] is wearing a "Transformer" T-shirt, I guess that makes this a Lou Reed tribute somehow?
Jon Caramanica: Is that a Laurie Anderson shot?

10:40 P.M. 'Royals' Is Song of the Year

Dave Itzkoff: Little Ella Yelich-O'Connor! She did it.
Jon Caramanica: Beating out Macklemore, no less. One slight skeptic of mainstream hip-hop excess bests the other — a close race!
Dave Itzkoff: I just want to hear Lorde say "mental" a few more times.
Jon Caramanica: Lorde also respectfully let the guy no one cares about speak first. She is the ethics queen!

10:38 P.M. Carole King and Sara Bareilles Perform

Dave Itzkoff: This Carole King / Sara Bareilles duo might make me cry, no joke.
Jon Caramanica: Literally just made a Sara Bareilles/Carole King joke a couple of weeks ago. Who knew? Carole King really giving this song more gravitas than she could have with Katy Perry's "Roar."
Dave Itzkoff: Katy must be SUPER jealous. "What a thrill to see the future of music in such good hands," Carole King says to not-Katy Perry.

10:26 P.M. Stevie Wonder Joins Daft Punk and Pharrell

Dave Itzkoff: I'm kinda excited for this, Jon. You can't bring me down! Did Pharrell change hats?
Jon Caramanica: Sure, sure, sure, I will let you have the cold comfort of your nostalgic urges, Dave. Also: this is exactly what recording in a studio is like.
Dave Itzkoff: We've come too far to give up who we are, Jon.
Jon Caramanica: This is literally what the 1977 Grammys looked and sounded like.
Dave Itzkoff: There's an Up With People vibe going around.
Jon Caramanica: Very bar mitzvah in there.
Dave Itzkoff: If it's a bar mitzvah, where's Drake?
Jon Caramanica: L'chaim!

10:22 P.M. Kacey Musgraves Wins Best Country Album

Dave Itzkoff: Kacey Musgraves defeats T Swift! And somehow the award didn't go to Macklemore!
Jon Caramanica: This is, undeniably, a coup. And proof that Grammy voters love to vote authenticity over pop when given a chance.

10:17 P.M. All-Star Country Jam

Dave Itzkoff: How many Firestone tires died for Jeremy Renner's outfit?
Jon Caramanica: To be fair, he was just trying to match Lorde's fingertips.
Dave Itzkoff: Please tell me they're going to do the "Highwaymen" verse about the star captain in outer space. Love that verse.
Dave Itzkoff: They didn't do it!
Jon Caramanica: Blake Shelton was drinking through rehearsal.
Dave Itzkoff: I feel like Alexander Payne is already adapting this musical number as his next movie.
Jon Caramanica: I feel like they trolled Imagine Dragons and told them there were no available showers. When do you think they're gonna have a chance to rehearse this?

10:07 P.M. Bruno Mars Wins Best Pop Album

Dave Itzkoff: Bruno! Watch for him at MetLife Stadium next week wearing about 100 more layers.
Jon Caramanica: Hey! Bruno Mars is popular! We swear! We liked him before the Super Bowl did!

9:59 P.M. Paul and Ringo Take the Stage

Dave Itzkoff: LL has to tell us what's coming up in the next HOUR. "We've only just begun." JUST BEGUN. Dang, I thought he was going to introduce Meryl. Ah, now the Paul and Ringo duet. Thank you, Based God.
Jon Caramanica: Where was Julia Roberts when the Beatles landed in New York?
Dave Itzkoff: Not even a twinkle in her daddy's eye. Eric Roberts was 7, though.
Jon Caramanica: If this band was a new band it would be playing venues in Bushwick even I don't go to.

9:53 P.M. Kacey Musgraves Performs

Dave Itzkoff: Feel like I'm definitely going to wake up tomorrow to an email from my mom disapproving of Kacey Musgraves's outfit.
Jon Caramanica: Tell your mom to chill! This is a win for her.
Dave Itzkoff: She's singing about joints, Jon. And kissing girls! On CBS!
Jon Caramanica: Is this an episode of "Two and a Half Men"? ZING! #tvcriticism
Dave Itzkoff: Does this mean we are only half way through the Grammys program??????

9:50 P.M. Slide Show: On the Red Carpet

9:44 P.M. Kendrick Lamar and Imagine Dragons Perform

Dave Itzkoff: LL Cool J reminds us it's the 30th anniversary of Def Jam Records, a label that surely would have signed Macklemore & Ryan Lewis.
Jon Caramanica: A label that would have trashed Imagine Dragons's dressing room.
Dave Itzkoff: "Def Jam forever!" — guy who is no longer on Def Jam. "This is it, the apocalypse." — Imagine Dragons.
Jon Caramanica: Taylor Swift is the No. 1 one rap fan. Is this whole performance a subtweet to Macklemore & Ryan Lewis?
Dave Itzkoff: Is that a note of approval from you, Jon?
Jon Caramanica: It is not! It is merely an observation. This is very irritating. Kendrick deserves better. The question is: does he know he deserves better?
Dave Itzkoff: Queen Latifah's uncertainty speaks for us all.
Jon Caramanica: That was… memorable. A wise man once told me that divisive is better than ignored, so…

9:39 P.M. Jay Z and Timberlake Win Best Rap Collaboration

Dave Itzkoff: Where is Timberlake?
Jon Caramanica: Justin couldn't get out of the Target commercial in time.
Dave Itzkoff: "I want to thank God, I mean, a little bit," says Jay. But then he thanks Beyoncé, and tells daughter Blue he has a gold sippy cup for her.
Jon Caramanica: Didn't Drake already drink out of his Grammy?
Dave Itzkoff: Who do I give my money to for "Maleficent"?

9:31 P.M. Ringo Starr Takes the Stage

Dave Itzkoff: SABBATH. But who will translate Ozzy for us?
Jon Caramanica: At least Dave Grohl isn't drumming for Ringo. Related: is Ringo is what Nate Ruess will look like in 30 years?
Dave Itzkoff: Ringo Starr appears courtesy of "The Night That Changed America, Feb. 9 on CBS." I feel obligated to say that for some reason.
Jon Caramanica: Even Beatles fans are taking bathroom breaks right now. This is stultifyingly dull.
Dave Itzkoff: I thought he was going to duet with McCartney, no? Can Dave Grohl get up there and broker some peace?

9:24 P.M. Lorde Wins Best Solo Pop Performance

Dave Itzkoff: Step off Sara Bareilles and Katy Perry! Lorde takes solo pop performance.
Jon Caramanica: Best GIF will be of her dead-serious eyes followed by the one of her deep exhale on stage. Or maybe she was merely responding to Sara Bareilles's hair.
Dave Itzkoff: And still not old enough to rent cars in this country! The talent is frightening.

9:21 P.M. Pink and Nate Ruess Perform

Dave Itzkoff: Shh, I gotta listen in on Bruno. Oh, he's just introing Pink and Nate Ruess. Give me something I can use for my article, Bruno! I guess I've seen enough of Pink's acrobatic shtick, but I'm warming to her duet with John Waters.
Jon Caramanica: I spent all my opinions on Fun. in 2012.

9:05 P.M. Taylor Swift Performs

Dave Itzkoff: TSWIFTTTTTTTTTTTTTT! A very vigorous performance. Could use a Jennifer Lawrence photobomb, though.
Jon Caramanica: Could use a headbanging GIF. So impressive how Taylor has gone from the teenage door-busting threat to country music to a 45-year-old adult contemporary balladeer in just five or so years.

She's going to be a great guest star on the 10th season of "American Horror Story."

9:03 P.M. Paul McCartney and Friends Win Best Rock Song

Dave Itzkoff: Incredibly, the Grammys could not give an award to both the Rolling Stones AND Paul McCartney. So McCartney (and Dave Grohl) get it.
Jon Caramanica: Really glad Dave Grohl was around to help this underdog win a Grammy.
Dave Itzkoff: Yeah, Krist Novoselic, interrupting Dave Grohl's Beatles shout-out to give his own shout-out to Black Sabbath.

9:00 P.M. John Legend Takes the Stage

Dave Itzkoff: John Legend introing "All of Me" — is he going to be joined by (a) special guest(s)? Or you mean a musician gets to just play their own song, by themselves, at the Grammys?

8:50 P.M. Keith Urban and Gary Clark Jr. Perform

Dave Itzkoff: Nothing to say about this Keith Urban performance, though I'm surprised Fox is willing to loan him out for the night.
Jon Caramanica: Look, I'll play nice. Keith Urban and Gary Clark Jr. are both phenomenal guitar players. Can't you tell?
Dave Itzkoff: It's comfortable.
Jon Caramanica: Even these dueling solos are polite. Gary Clark should be trying to demolish Keith Urban but he's too nice for that. Also this is a bad song, F.Y.I.
Dave Itzkoff: But Pauley Perrette will save us by explaining social media to us, right?
Jon Caramanica: All my selfies have Pauley Perrette in them.

8:44 P.M. Robin Thicke Joins Chicago

Dave Itzkoff: Is LL hinting at Chicago and Robin Thicke? I deduced his clues correctly!
Jon Caramanica: Whoever paired Robin Thicke and Chicago has a genuine sense of humor! Miley coming out to sing "You're the Inspiration" soon?
Dave Itzkoff: This is like the most simpatico pairing since hydrogen met oxygen. Can't believe Peter Cetera has to take a back seat, though. Fortunately for CBS, everyone kept their tops on for "Blurred Lines."

8:33 P.M. Here Comes Katy Perry

Dave Itzkoff: "The Grammys had a choice between reuniting two of the Beatles or all of the Jonas Brothers. That's a tough one." — Steve Coogan. Just a set-up for Katy Perry, who I believe is going to do "Brave." I mean, "Roar." Well obviously this isn't "Roar."
Some sort of outtake from "Masters of the Universe"?
Jon Caramanica: "Dark Horse"! Juicy J has won an Oscar and it's still a shock to see him on the Grammys stage. Kudos to Katy for being the second best goth performance of the night, though.

8:30 P.M. A Grammy for 'Get Lucky'

Dave Itzkoff: Quite the show down between "Get Lucky," "Blurred Lines" and "Suit & Tie." But "Get Lucky" takes it. The Daft Punk 'bots decline to comment. Pharrell begins, "Dude."
Jon Caramanica: Hard to have someone to root for in this one, or against for that matter. Bless Nile Rodgers, though. And whoever ventilates Daft Punk's helmets.

8:22 P.M. Praise for Lorde

Dave Itzkoff: I'm done. I'm out. So happy.
Jon Caramanica: Some things Lorde did beautifully: pleated pants, platform boots, paint-dipped fingers, purple lipstick. And sing.
Dave Itzkoff: Those NAILS.
Jon Caramanica: It seems safe to say that the Grammys are downhill from here? Everything after this is a duet between the ghost of Ray Price and a Victrola playing a Bread album.
Dave Itzkoff: I am still marginally looking forward to Daft Punk, and to Paul and Ringo. That still leaves about three hours of show, though.

8:12 P.M. Macklemore & Ryan Lewis Are Best New Artists

Dave Itzkoff: First award of the night will be best new artist — I guess Pharrell has to get out quick to fight some forest fires or something.
Jon Caramanica: He has the Grammy under his hat! Tricky!
Dave Itzkoff: Another win for Macklemore & Ryan Lewis. Get happy, Jon. Start typing that think piece.
Jon Caramanica: #been #typed. Kacey Musgraves gets to be bummed on camera again.
Dave Itzkoff: Shh, I don't want to miss a single frame of this Lorde performance. See you in like three minutes.

Hey @Pharrell, can we have our hat back? #GRAMMYs

— Arby's (@Arbys) 27 Jan 14

8:04 P.M. Beyoncé and Jay-Z Open the Grammys

Dave Itzkoff: Now let's get ready for the comedy stylings of LL Cool J. No, my mistake — we're opening on a performance from Beyoncé.
Jon Caramanica: An actually smart choice by the Grammys, even if B isn't up for the big awards tonight. No one is more relevant than her at this moment.
Dave Itzkoff: By law, this Beyoncé performance has to be followed by a speech from Obama or an electrical failure. No way — they got Barney's designer and Anheuser Busch creative director Shawn Carter to perform with Beyoncé?
Jon Caramanica: He's phenomenally busy! promoting D'Usse cognac! And saying "breastices" on network TV. Can I encourage readers to report him to the FCC?
Dave Itzkoff: And NOW the comedy stylings of LL Cool J. Finally.

First joke: purple velvet with a peak collar!

Dave Itzkoff: "Music warms us, which is a good thing for all of our friends back East. Brrrrr." I can't believe LL went there!
Jon Caramanica: "NCIS: LA" made him soft

7:41 P.M. A Coronation for Macklemore?

Dave Itzkoff: We're still a few minutes away from the start of the show —
Jon Caramanica: Or are we? I'm suffering already.
Dave Itzkoff: But, clearly, the big news is Macklemore & Ryan Lewis dominating the pre-show rap categories, including a win in the best rap album category over nominees like Kanye West, Drake and Kendrick Lamar.
Jon Caramanica: To the surprise of absolutely no one.
Dave Itzkoff: Jon, I'm feeling like you have a reaction.
Jon Caramanica: 1,200 words in the Tuesday paper. Next.
Dave Itzkoff: The big pre-pre-show news, before a single award was even distributed, was an on-air stunt that will occur during Macklemore & Ryan Lewis's performance of "Same Love," at which 34 couples are going to be married by Queen Latifah. (Didn't make any of that up.) So is this night basically a coronation of Macklemore & Ryan Lewis?
Jon Caramanica: Let's all support marriage equality, which is to say the right to be married in a fashion that will embarrass you and your children and your children's children for time eternal. You have to wonder if Macklemore was the safe vote in rap categories for people who know nothing about rap, but they'll make a hard turn to someone like Taylor Swift in the big categories.
Dave Itzkoff: I take it you are more excited for the duet between Imagine Dragons and Kendrick Lamar?
Jon Caramanica: I wish I didn't know what I know about the origins of that duet. On the plus side, Imagine Dragons up for best rap performance next year!
Dave Itzkoff: To be continued!

7:32 P.M. Grammy Weddings: Sweet Statement or Stunt?

This morning my colleague Ben Sisario reported that the Grammy Awards decided to add something new to its show this year: a marriage ceremony that will coincide with Macklemore and Ryan Lewis's performance of "Same Love." The song became a pro-gay marriage anthem in 2013, a year that saw advances for same-sex marriage across the United States after Supreme Court rulings and actions in various states. And tonight 34 couples, gay and straight, will join in that spirit by making their unions official in a ceremony officiated by Queen Latifah.

The news prompted some confusion and criticism on social media. Many saw the event as a stunt. Others thought it might only involve same-sex couples. Here are a few selected reactions from users of Twitter.

One journalist, Amanda Marcotte, questioned the Grammy producers' assertion that the ceremony shouldn't be seen as making a big statement about the political conflict around marriage:

http://t.co/ddAN1DLVU3 The funniest part is the repeat insistence that this not be taken as a statement.

— Amanda Marcotte (@AmandaMarcotte) 26 Jan 14

Another Twitter user saw some hypocrisy in the way the ceremony would involve so many couples:

like they snickered at Rev. Moon for performing RT @jmattbarber Grammy clowns to feature mass "gay wedding" circus http://t.co/qF2ChxOd44

— Bill P. (@billpr53) 26 Jan 14

One woman shared how she'd react if it happened to her:

If I had a fiancé and he suggested we get married during a Macklemore performance we wouldn't be getting married…ever #grammys

— Brittanie (@ItsBriittaniiee) 26 Jan 14

Boing Boing's Xeni Jardin wondered if the marriages would have much duration:

On tonight's Grammys, 34 gay and straight couples will get married to a Macklemore song. They all get divorced on the next Daytime Emmys.

— Xeni Jardin (@xeni) 26 Jan 14

Josh Greenman at the New York Daily News imagined how the marriages that lasted would be seen in the future:

"Daddy, do we have to watch your wedding video *again*???" http://t.co/t5eezyj9bX

— Josh Greenman (@joshgreenman) 26 Jan 14

And some Twitter users said they were ready to ignore the whole event:

I'm going to completely ignore the annoying Macklemore wedding thirsty Grammy ratings ploy.

— c-lo (@goodgirlcrystal) 26 Jan 14

But not everyone was so cynical about the Grammy nuptials. One woman expressed her excitement that friends of hers would be participating:

a friend of a friend of mine is getting married during tonight's performance of macklemore at the grammys. pretty cool.

— Hayley ツ (@HayleyzZZ) 26 Jan 14

And another user of the social media service was ready to break out the hanky:

If Macklemore actually has 34 couples getting married in his performance, I will be crying during the whole thing.

— mocha clifford. (@__lovesincerely) 26 Jan 14

She wasn't alone in welcoming the event:

Macklemore's performance will definitely be one for the history books! 34 couples will be getting married on stage!!! WOW!!! #CityGRAMMYs

— Jordan Miller (@greendayrock92) 26 Jan 14

34 couples are getting married during Macklemore's performance tonight. How cute.

— Kenz.♡ (@_kenziii) 26 Jan 14

If Macklemore is really having those couples get married during his performance then that'll be dope.

— India. (@RebelleMonroe_) 26 Jan 14

— Michael Roston

13.07 | 0 komentar | Read More

DealBook: Despite a Rough Year, JPMorgan Chase Gives Jamie Dimon a Big Raise

Updated, 9:09 p.m. | JPMorgan Chase, after a year marred by scandal and stiff regulatory penalties, has decided to award its chief executive, Jamie Dimon, $20 million in compensation for 2013, an amount that will further inflame the debate over the accountability of senior bank executives.

The award, announced in a company filing on Friday, is 74 percent higher than the $11.5 million that Mr. Dimon earned in 2012. By approving a hefty raise, the bank's board is signaling that it remains firmly behind Mr. Dimon after 12 months in which JPMorgan suffered several bruising legal setbacks, including a record $13 billion settlement with the Justice Department over soured mortgage securities.

In justifying the $20 million package, which includes $18.5 million of JPMorgan stock as well as a base salary of $1.5 million, the board said that JPMorgan had advanced in many ways under Mr. Dimon. And to many on Wall Street, as well as some other long-serving chief executives, Mr. Dimon wholly deserves the raise. "I think he's worth more than that," Warren E. Buffett, the chief executive of Berkshire Hathaway, said. "Over all, I think the shareholders of JPMorgan and the American people should be happy that Jamie Dimon has been running the bank over this period."

Other senior executives at the bank also got lush compensation packages. But it is unlikely that many JPMorgan employees will be receiving an increase anywhere near the size of Mr. Dimon's.

When JPMorgan emerged from the financial crisis of 2008 stronger than most of its peers, Mr. Dimon was widely viewed in Washington and on Wall Street as a shrewd manager of risks. But after a large trading loss in 2012, known as the London Whale debacle, questions arose about the effectiveness of JPMorgan's management. At the same time, Mr. Dimon's combative manner was increasingly viewed as a liability for the bank at time when it needed to make peace with regulators.

After the trading loss, the bank's legal problems only escalated. Along with the $13 billion settlement with the Justice Department, JPMorgan last year paid out a large sum to settle allegations that some of its traders manipulated energy prices, and, most recently, federal prosecutors investigating the Ponzi scheme of Bernard L. Madoff extracted $1.7 billion from JPMorgan for failing to alert authorities to suspicions relating to Mr. Madoff's business.

Given the breadth of the legal onslaught, JPMorgan's critics contend that the board should not have increased Mr. Dimon's pay. "If there was ever a time to take a wait-and-see attitude and pay him what they paid last year, this is it," Cornelius K. Hurley, a professor at the Boston University School of Law, said. "This is a thumb in the eye of regulators and a thumb in the eye for the public."

Indeed, Mr. Dimon's raise was opposed by a vocal minority of JPMorgan's board who favored keeping Mr. Dimon's pay roughly flat with 2012. But Joseph Evangelisti, a spokesman for the bank, denied that the discussions were heated. "That's simply not true," he said. But when asked, Mr. Evangelisti did not make a member of the board available for an interview.

With the raise, Mr. Dimon has earned more than $90 million since 2008, much of it in stock that Mr. Dimon cannot sell for two to three years, which would have appreciated in value since the awards.

These types of high compensation packages often reignite concerns about corporate governance at large banks.

Some banking experts say they think that the board's approval of Mr. Dimon's raise shows the need to remove him from his position as chairman of the board, leaving him with just the chief executive role. The bank's shareholders overwhelmingly voted down such a move last year. Even so, those experts contend that removing Mr. Dimon from the chairman's seat would have made the board more independent — and less likely to have given him an $8.5 million raise. "This is why you need to split the chairman and the C.E.O. roles," Paul Miller, a bank analyst at FBR Capital Markets, said. "I don't think anyone is worth this money."

But Mr. Buffett, a JPMorgan shareholder, said he was not convinced that the roles had to be split. It is far more important, he said, that a board pick the right person to head a company. "The determining factor of whether the board is doing its job is whether they have the right C.E.O.," he said. "That trumps everything else."

JPMorgan says that it has taken substantial steps to beef up its controls to prevent future lapses. Several senior executives connected to the London Whale affair have left the bank, a sign that top employees do pay for serious mistakes. And despite the large payouts to government authorities last year, JPMorgan's underlying businesses are performing well and its shareholders are earning strong returns.

JPMorgan's supporters also assert that its biggest fines were related to shoddy mortgage practices that did not occur under Mr. Dimon's watch. The board noted on Friday in the filing that the practices occurred at Washington Mutual and Bear Stearns, which JPMorgan bought in the heat of the financial crisis. But a significant portion of the $13 billion settlement was related to JPMorgan's own practices. And some banking experts still say they think Mr. Dimon bears some responsibility for the penalties stemming from Washington Mutual and Bear Stearns — because, they say, he was keen to acquire both firms, even with their potential for future mortgage losses. "They bought those firms on Jamie Dimon's watch," Mr. Hurley said.

JPMorgan still faces several government investigations, including one into whether the bank's hiring practices in China were a form of bribery. These investigations could make life difficult for the bank and Mr. Dimon in the coming months.

Still, right now, it is hard to see what will weaken Mr. Dimon's standing. As long as the bank's profits continue to roll in and its share price stays elevated, he is likely to have the strong support of shareholders. "If you manage a business that size, you can do a lot of things that are very helpful to the economy, but you cannot do everything perfectly," Mr. Buffett said.

But outside of Wall Street, the pay package may be viewed differently. "It doesn't reconcile for JPMorgan to be paying out billions in fines while its C.E.O.'s compensation nearly doubled," Mr. Hurley said. "You usually get fired for that, not rewarded."

13.08 | 0 komentar | Read More

DealBook: Economic Shifts in U.S. and China Batter Markets

Updated, 9:20 p.m. | The ascent of developing countries over the last decade has been fueled by two global trends: the steady rise of China and the willingness of the Federal Reserve to stimulate the economy.

Now, with both trends starting to retreat, investors have been heading for the exits in markets as far removed as Buenos Aires, Istanbul and Beijing, with effects spilling over into the rest of the world.

A decline this week picked up speed and spread around the globe on Friday, leading to the first sustained drop in United States stock indexes in 2014. The Standard & Poor's 500-stock index fell 2.1 percent on Friday, to end its worst week since June 2012.

But the damage is expected to be worse in places that have relied on demand for raw resources in China, whose economic advance is slowing. An index of Chinese manufacturing growth released on Thursday showed that the most important cog in the country's economy, the world's second-largest, was contracting for the first time in six months.

The damage has been particularly severe in countries that are already suffering from political instability, like Turkey and Argentina. Turkey's currency fell to a record low against the dollar on Friday, a drop that will hit the purchasing power of everyone in the country.

On a street corner in Istanbul, Yilmaz Gok, 51, said, "I'm a retiree making ends meet on a small pension and all I care about is a possible increase in prices."

"I will need to cut further," he said. "Maybe I should use my natural gas heater less."

The concerns about developing economies are being heightened by the Fed's recent decision to begin pulling back on the bond-buying stimulus programs that have helped keep interest rates low around the world. Now, many countries that had come to rely on those low rates could face a surge in borrowing costs and a period of painful readjustment. Many emerging countries could also be hurt if investors choose to pull their money to chase returns in the recovering economies in the United States and Europe.

"A lot of these currencies are getting trashed and people's standards of living are going down," said Michael Purves, the chief global strategist at Weeden & Company. "There is a potential for social unrest to accelerate."

The slump this week was the first serious break in a long stock market rally that took the broad United States stock market up nearly 30 percent last year, fueled by signs of an economic recovery. The extent of the rise had led many sophisticated investors to expect some kind of pullback in American stocks.

"This is a convenient and healthy short-term pullback," said David Lafferty, the chief market strategist for Natixis Global Asset Management. "The market really needs some time to digest last year's gains."

In the rest of the world, the damage so far is less severe than it was during similar turmoil in emerging markets last summer, when the Fed first talked about easing its bond-buying programs. Most markets ended up bouncing back from that episode. But there is a growing recognition that the developing world will not be the engine of growth that it has been for much of the last decade.

In China, the economy is still growing faster than almost anywhere else, but the pace is slowing and the government is intent on developing an economy that is less intent on exporting goods. This is weighing on everything from the soybean industry in Brazil to the nickel mines of Mozambique.

For some countries, though, the recent problems have been relatively independent of China.

In Argentina, the government's efforts to fend off inflation and artificially support the local currency backfired. This week, the government acknowledged the problem when it allowed the value of the peso to drop and made it easier to buy dollars, but that only spurred a greater sense of crisis. The peso finished the week down 16 percent. Many analysts have said that the government still has to deal with the fundamental problem of rampant inflation.

Some of the most drastic moves have been in Turkey, one of the largest emerging economies. On Friday, the Turkish lira was trading at 2.314 a dollar, creeping above 2.3 for the first time, after the central bank failed in its effort to control the slide.

Turkey had been one of many places where business magnates had used the Fed's low interest rates to pay for a building boom. It is now unclear whether Turkish businesses will be able to pay off those loans if interest rates rise.

The country has also been plunged into political turmoil, which is hurting business confidence. In late December, Prime Minister Recep Tayyip Erdogan became entangled in a battle with the Gulen movement, a powerful pro-Islamic network and once a close ally of the government.

On Friday, Mr. Erdogan accused the country's largest business group of treason after its chairman warned about a possible retreat of global investors if the government continued political moves that endangered the country's democratic system. The business group had forecast that Turkey's economy would grow 3.4 percent in 2014, as opposed to a government projection of 4 percent.

Because Turkey and many other emerging market economies rely on low interest rates, their fate will depend, in part, on the Fed's future decisions about how to pull back on its bond-buying programs. In December, the Fed decided to cut back its monthly purchases for the first time, to $75 billion from $85 billion. Next week, the Fed is scheduled to meet and announce whether it will continue to reduce its bond purchases.

"Emerging markets can't seem to escape the shadow of the Federal Reserve," Andrew Wilkinson, the chief market analyst at Interactive Brokers, wrote to clients on Friday.

Economists are carefully watching the United States for any signs that it is vulnerable to the weakness overseas or that the economic recovery is slowing independently. The most recent monthly employment report showed a sharp slowdown in job creation for the first time in months and data this week showed that home sales came in slightly lower than expected.

But the main American indexes are still within a few percent of their record highs. The S.&P. 500 ended Friday down 2.1 percent, or 38.17 points, at 1,790.29, bringing it down 3.1 percent for the year. The Dow Jones industrial average fell 2 percent, or 318.24 points, to 15,879.11. The Nasdaq composite index fell 2.2 percent, or 90.70 points, to 4,128.88.

United States, German and British bonds have been benefiting as investors seek them out as a refuge from the turmoil in riskier assets. The yield on the 10-year Treasury note fell to 2.72 percent, from 2.78 percent on Thursday, after hovering near 3 percent earlier this month.

An array of United States economic data has continued to point to an economic recovery that is gaining strength and could actually benefit if investors are looking for somewhere to put money that was previously in developing countries.

"There's a part of this that actually strengthens the U.S.," Mr. Purves said. "You may have a flight to the best house on the block."

Reporting was contributed by Keith Bradsher in Hong Kong, Sebnem Arsu in Istanbul and Jonathan Gilbert in Buenos Aires..

---

This post has been revised to reflect the following correction:

Correction: January 24, 2014

An earlier version of this article misstated the day that the Standard and Poor's 500-stock index was down about 1.2 percent at one point. It was Friday morning, not Monday.

A version of this article appears in print on 01/25/2014, on page A1 of the NewYork edition with the headline: ECONOMIC SHIFTS IN U.S. AND CHINA BATTER MARKETS .

13.08 | 0 komentar | Read More

DealBook: Fined Billions, Bank Approves Raise for Chief

A year after an embarrassing trading blowup led to millions of dollars being docked from Jamie Dimon's paycheck, the chairman and chief executive of JPMorgan Chase is getting a raise.

JPMorgan's board voted this week to increase Mr. Dimon's annual compensation for 2013, hashing out the pay package after a series of meetings that turned heated at times, according to several executives briefed on the matter. The raise — the details were not made public on Thursday — follows a move by the board last year to slash Mr. Dimon's compensation by half, to $11.5 million.

When it made that deep pay cut, the board was giving a stern rebuke over the fallout from the "London Whale" multibillion-dollar trading blunder. This week, directors, gathered in a conference room at the bank's Park Avenue headquarters overlooking a snow-covered Central Park, discussed what message their next decision on the bank chieftain's compensation would send.

The debate pitted a vocal minority of directors who wanted to keep his compensation largely flat, citing the approximately $20 billion in penalties JPMorgan has paid in the last year to federal authorities, against directors who argued that Mr. Dimon should be rewarded for his stewardship of the bank during such a difficult period. During the meetings, some board members left the conference room to pace up and down the 50th-floor corridor.

Details on the chief executive's compensation will be disclosed in the coming days, possibly as soon as Friday.

A spokesman for the bank declined to comment.

Mr. Dimon's defenders point to his active role in negotiating a string of government settlements that helped JPMorgan move beyond some of its biggest legal problems. He has also solidified his support among board members, according to the people briefed on the matter, by acting as a chief negotiator as JPMorgan worked out a string of banner government settlements this year.

Also under his leadership, the bank has generated strong profits and its stock price is up more than 22 percent over the last 12 months. Some board members fault what they consider to be overzealous federal prosecutors for the hefty fines, rather than Mr. Dimon or the bank, arguing that JPMorgan is being penalized for the sins of firms like Bear Stearns that it scooped up during the financial crisis.

But many of those very problems arose under Mr. Dimon's watch, including $1 billion in fines from regulators over the trading blowup. Leaving his compensation unchanged could have sent a symbolic message of contrition to authorities.

Instead, the board's decision to raise his pay may energize critics who have questioned whether the directors can provide an effective check on the charismatic Mr. Dimon, who is both chairman and chief executive. Some shareholders have argued for those jobs to be split to limit his power, but a proposal for such a division was handily defeated at the bank's annual meeting last spring.

It is unlikely that Mr. Dimon will receive anything near the $23.1 million he got for 2011, when he was the highest-paid chief executive at a large bank. So far, none of the biggest Wall Street firms have released the 2013 compensation for their senior executives. Last year, Lloyd C. Blankfein, the chairman and chief executive of Goldman Sachs, took home $21 million for 2012, about double what Mr. Dimon got once the board slashed his pay. At Wells Fargo, John Stumpf, the bank's chief executive, received $19.3 million for his work atop the country's largest mortgage lender.

Early signs, like stock payouts, suggest that bank chief executives are headed for a pay increase this year. Morgan Stanley, for example, gave James P. Gorman, its chief executive, a stock bonus valued at approximately $5 million as part of his total compensation for 2013. That is about double the stock bonus he received a year earlier.

JPMorgan's directors may have decided that Mr. Dimon, as his peers may, should get a raise, but to ordinary Americans — and possibly to regulators — the decision to increase his compensation may seem curious given the banner penalties that federal authorities have extracted from the bank. It is not unheard-of for chief executives to lose their jobs when their companies have been battered by regulators.

But a crucial difference is that JPMorgan's legal travails have not threatened the bank financially. While steep legal fees did weigh on the bank's bottom line, JPMorgan still reported annual 2013 profits of $17.9 billion. And while other bank chief executives stumbled during the financial crisis, Mr. Dimon never did, emerging from the wreckage even more powerful.

Mr. Dimon's star has risen more recently as he took on a critical role in negotiating both the bank's $13 billion settlement with government authorities over its sale of mortgage-backed securities in the years before the financial crisis and the $2 billion settlement over accusations that the bank turned a blind eye to signs of fraud surrounding Bernard L. Madoff.

Just hours before the Justice Department was planning to announce civil charges against JPMorgan over its sales of shaky mortgage investments in September, Mr. Dimon personally reached out to Attorney General Eric H. Holder Jr. — a move that averted a lawsuit and ultimately resulted in the brokered deal. Just a few months later, Mr. Dimon acted as an emissary again, this time, meeting with Preet Bharara, the United States attorney in Manhattan leading the investigation into the Madoff Ponzi scheme.

Still, JPMorgan's board struggled to strike the right balance in determining Mr. Dimon's compensation, according to the people briefed on the matter. Too large a pay increase might send the wrong message to shareholders and regulators. Yet cutting Mr. Dimon's pay would, some board members feared, alienate the chief executive.

Ultimately, those board members arguing to hold the line pay lost out, conceding that while the perception of the increase might be off-putting, the impact of cutting or keeping a lid on his pay could have more profound implications within the bank.

Mr. Dimon is also benefiting, the people say, from a view among some board members that the government's assault on JPMorgan is driven less by the bank's actual transgressions and more by a desire, stoked by anti-bank sentiment, to appear tough against Wall Street, the people said.

Echoing that sentiment, Mr. Dimon said during a television interview on Thursday in Davos, Switzerland, that "I think a lot of it was unfair."

A version of this article appears in print on 01/24/2014, on page A1 of the NewYork edition with the headline: Fined Billions, Bank Will Give Dimon a Raise .

13.07 | 0 komentar | Read More

News Analysis: Exporting U.S. Rules for Foreign Banks

One of the biggest loopholes on Wall Street may soon close.

More than three years ago, Congress passed a sweeping overhaul of the financial system that was supposed to leave no big bank untouched. Staggeringly, though, half of the large banks on Wall Street are able to avoid crucial parts of the overhaul — simply because they are foreign.

In particular, the overseas banks — Barclays, Deutsche Bank and Credit Suisse among them — have not had to comply with parts of the overhaul, known as the Dodd-Frank Act, that aim to strengthen the financial buffer, or capital, that banks must maintain to absorb potential losses on loans and trades.

Now, however, the American authorities appear poised to snatch that advantage away.

The Federal Reserve, which regulates banks, is expected to complete rules soon that will force large foreign banks to abide by many of the requirements their American counterparts have had to operate under since the passage of Dodd-Frank.

The foreign banks are not pleased with the crackdown.

The Fed first proposed the foreign bank rules at the end of 2012 and, as is its practice, invited the industry and the public to provide feedback. The Fed received strongly worded letters in opposition from a handful of large foreign lenders, and even got complaints from certain foreign bank regulators, including the BaFin of Germany.

In the face of such criticism, it is possible the Fed will end up substantially softening its rules. But senior executives at the foreign banks said they did not expect much in the way of dilution. "We, at this point, don't expect any larger changes to it, maybe some clarifications," Stefan Krause, Deutsche Bank's chief financial officer, said on Monday in a conference call with analysts after reporting a $1.3 billion loss in the fourth quarter.

A final rule that looks largely like the original version may satisfy consumer advocates who contend that all large institutions operating in America should be subject to the country's rules. "Whether the foreign banking rule gets done is a big test," said Marcus Stanley, policy director at Americans for Financial Reform. And if the rules do have teeth, it will end an intriguing game of cat and mouse, in which some overseas banks have taken elaborate steps to escape the reach of regulators.

Congress wrote Dodd-Frank so that its rules on capital would apply to foreign lenders, which received substantial assistance from the Fed in the heat of the financial crisis. After the legislation went into effect, however, Barclays and Deutsche Bank changed the legal status of their big American operations in such a way that parts of Dodd-Frank did not apply to them. This effectively allowed them to avoid putting large amounts of capital into their American units to satisfy the law's requirements.

Bank executives sometimes resist calls to raise extra capital because it may mean selling new shares, which can weaken the measures of profitability that Wall Street obsesses over. And if Dodd-Frank had applied, it might have forced some foreign firms to raise substantial amounts of new capital. The Deutsche Bank American operations containing its powerful Wall Street businesses actually had a negative capital position at the end of 2011, according to regulatory measurements of capital contained in a public filing.

Since the legal status of Barclays and Deutsche Bank changed, outsiders have no longer been able to get a clear picture from filings of the capital positions of their combined American operations. But Shailesh Raikundlia, a bank analyst with Espírito Santo Investment Bank in London, estimates that Deutsche Bank may need to find roughly $14 billion in capital for its American units. "Basically, Deutsche could raise some capital and downstream it," he said. "This will have a negative impact on their profitability." In recent conference calls, however, Mr. Krause of Deutsche Bank has played down the financial impact of the new rules and stressed that a transition would be manageable.

Even so, the European banks say the Fed's rules are unfair. In particular, American banks are not required to lock up capital at their American operations, like the Europeans will have to. Instead, they contend, the Americans generally get to set capital for their firms as a whole, which gives them more freedom to move capital among their different operations. The Americans also do not have to set up a new holding company for their American units, which, in theory, means they can avoid the potentially costly restructurings that the Europeans will most likely have to bear.

Supporters of the foreign bank rules, however, respond that it will remove a huge competitive advantage that some European banks have enjoyed for many years. Under the rule, they will now have to hold capital at their American operations that is roughly equivalent to that of their American rivals. "All this does is create a level playing field for banks operating in the United States," said Dennis M. Kelleher, president of Better Markets, a group that has pressed for stronger curbs on the banking industry.

Even under the new rules, the largest American banks may effectively have more capital than their European counterparts. That is because the biggest American institutions currently face new, separate regulations from the Fed that would force them to maintain higher companywide leverage ratios — a crucial measure of capital — than most foreign banks will have to.

One looming question is whether the Europeans will retaliate against the new rules once they go into effect — and force American banks to lock up capital at their operations overseas. But the Americans, with higher levels of capital, may be able to handle such a move.

Some consumer advocates say they would welcome a move by Europe to further toughen its banking regulations.

"Considering the number of problems with American banks that have occurred in London subsidiaries, I would appreciate seeing the Europeans raise the bar for foreign operations of American banks," Mr. Stanley said. "That would be a win for the American taxpayer."

A version of this article appears in print on 01/23/2014, on page B1 of the NewYork edition with the headline: Exporting U.S. Rules For Banks .

13.07 | 0 komentar | Read More

Bits Blog: Big Web Crash in China: Experts Suspect Great Firewall

Updated, 10:30 p.m. |

SAN FRANCISCO — The story behind what may have been the biggest Internet failure in history involves an unlikely cast of characters, including a little-known company in a drab building in Wyoming and the world's most elite army of Internet censors a continent away in China.

On Tuesday, most of China's 500 million Internet users were unable to load websites for up to eight hours. Nearly every Chinese user and Internet company, including major services like Baidu and Sina.com, was affected.

Technology experts say China's own Great Firewall — the country's vast collection of censors and snooping technology used to control Internet traffic in and out of China — was most likely to blame, mistakenly redirecting the country's traffic to several sites normally blocked inside China, some connected to a company based in the Wyoming building.

The Chinese authorities put a premium on control. Using the Great Firewall, they police the Internet to smother any hint of antigovernment sentiment, sometimes jailing dissidents and journalists; they blacklist major websites like Facebook and Twitter; and they block access to media outlets like The New York Times and Bloomberg News for unfavorable coverage of the country's leaders.

But the strange story of Tuesday's downtime shows that sometimes their efforts can backfire.

The China Internet Network Information Center, a state-run agency that deals with Internet affairs, said it had traced the problem to the country's domain name system. One of China's biggest antivirus software vendors, Qihoo 360 Technology, said the problems affected about three-quarters of the country's domain-name system servers.

"I have never seen a bigger outage," said Heiko Specht, an Internet analyst at Compuware, a technology company based in Detroit. "Half of the world's Internet users trying to access the Internet couldn't."

Those domain-name servers, which act like an Internet switchboard, routed traffic from some of China's most popular sites to an Internet address that, according to records, is registered to Sophidea, a company based, at least on paper, in that Wyoming building, in Cheyenne. It is unclear where the company or its servers are physically based, however.

With so much Internet traffic flooding Sophidea's Internet address, Mr. Specht said he believed it would have taken less than a millisecond for the company's servers to crash.

Until last year, Sophidea was based in a 1,700-square-foot brick house on a residential block of Cheyenne. The house, and its former tenant, a business called Wyoming Corporate Services, was the subject of a lengthy Reuters article in 2011 that found that about 2,000 business entities had been registered to the home. Among them were a company controlled by a jailed former Ukraine prime minister, the owner of a company charged with helping online poker operators evade online gambling bans, and one entity that was banned from government contract work after selling counterfeit truck parts to the Pentagon.

Wyoming Corporate Services, which helps clients anywhere in the world create companies on paper and is designated to receive lawsuits on their behalf, moved its headquarters 10 blocks from its former base last year. Gerald Pitts, the Wyoming Corporate Services president, said in an interview on Wednesday that his company acted as the registered agent for 8,000 businesses, including Sophidea, though he did not know what the company did.

Technology experts say Sophidea appears to be a service that reroutes Internet traffic from one website to another to mask a person's whereabouts, to make it easier to send spam for example — or to evade a firewall, like the ones that Chinese censors erect.

Sophidea's managers are not publicly listed. Wyoming is light on business regulation. The state requires only that companies file a short annual report disclosing assets that are physically located in Wyoming and the name of one person submitting the report. According to Wyoming state records, Sophidea's director is Mark Chen, with no associated contact information.

Mr. Pitts, of Wyoming Corporate Services, said he could not provide any further information for the company without a legal order.

But for less than a millisecond on Tuesday, the company's operators may have been surprised to find that a huge portion of the world's Internet traffic was firing at their servers and that their Internet address was the subject of much speculation within the Chinese media. Several Chinese newspapers named Sophidea's Internet address as the "No. 1 suspect" in a cyberattack.

By late Tuesday, some technologists surmised that the disruption might have been caused by Chinese Internet censors who tried to block traffic to Sophidea's websites because they could be used to evade the Great Firewall and mistakenly redirected traffic to the Internet address.

That theory was buttressed by the fact that a separate wave of Chinese Internet traffic Tuesday was simultaneously redirected to Internet addresses owned by Dynamic Internet Technology, a company that helps people evade China's Great Firewall, and is typically blocked in China.

According to D.I.T.'s website, its clients include Epoch Times, a newspaper affiliated with the Falun Gong movement; Voice of America; Radio Free Asia; and Human Rights in China, an activist group based in New York.

Bill Xia, a Falun Gong adherent who founded D.I.T. after emigrating to the United States, said in an email that the problem could have been caused by a "misconfiguration" in the state's firewall, which controls traffic across multiple Internet service providers in China. "Only the Great Firewall has this capability ready," he said.

Greatfire.org, an independent site that monitors censorship in China, echoed that theory in a blog post.

One thing is certain, said Mr. Specht of Compuware: Chinese Internet users' and companies' trust in the Internet has been shaken. "Already Chinese Internet users do not have too much trust in the Internet," he said.

Amy Qin contributed reporting from Beijing.

---

This post has been revised to reflect the following correction:

Correction: January 22, 2014

An earlier version of this post misstated where Chinese Internet traffic was redirected. The physical location of the servers receiving the traffic is not clear.

A version of this article appears in print on 01/23/2014, on page A1 of the NewYork edition with the headline: Big Web Crash: Experts Suspect Great Firewall .

13.07 | 0 komentar | Read More