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Delta-Virgin takes up battle for New York-London fliers


ATLANTA (Reuters) – Delta Air Lines (DAL.N) has been making inroads in the dogfight over the lucrative market for business travel between New York and London, but the newly merged American Airlines Group (AAL.O) is fighting back.

Delta is hoping to attract customers through its new partnership with Virgin Atlantic, known for its high-tech and non-traditional approach to flying, and its own boosted profile in New York, where it expanded flights and renovated terminals.

Now under new management, American is trying to bounce back from years of under-investment and market share losses, drawing from its recent merger with U.S. Airways.

The New York-London route is popular with Wall Street executives who are willing to pay for the priciest seats and who often travel at the last minute. Eager for their business, airlines are using their best planes on the route and investing in upgrades such as satellite WiFi and seats that turn into flat beds.

The alliances provide more flights under one banner, and better links to other U.S. and European cities. That convenience can win over corporate accounts, locking in lucrative business travelers.

“This is a battle royale,” said George Hamlin, an aviation consultant in Fairfax, Virginia. “This is about who gets the greatest number of the passengers who pay the most money.”

American and joint venture partner British Airways (ICAG.L) have an estimated 59 percent share of seats flown between the United States and London’s Heathrow airport, compared with about 24 percent for Delta and Virgin, and United Continental Holdings Inc’s (UAL.N) 14 percent share, according to a U.S. government filing by Delta and Virgin.

IMPORTANCE OF NEW YORK

London is the top international destination from New York and business-class fares can reach into the thousands of dollars, making the route one of the most profitable.

For example, the highest possible business-class fare between John F. Kennedy airport and London Heathrow on any given day is about $18,200 round trip, according to Nick Fleetwood, a manager at Cook Travel in New York.

While the airlines don’t disclose New York-London revenue, their Atlantic routes, which include destinations other than London, account for significant income.

Delta’s passenger revenue from Atlantic service rose 3 percent to $5.7 billion last year, and the region supplied about 15 percent of its operating revenue. American’s 2013 Atlantic revenue rose 10 percent to $3.8 billion, accounting for about 14 percent of overall revenue.

Delta says corporate customer interest has increased since its Virgin venture formally began in January. While Virgin’s hip image and planes fitted with mood lighting and futuristic bars are part of the lure, Delta is also aiming to win business travelers who previously shunned it because of its weak schedule to London Heathrow.

Delta offered just three nonstop daily flights between New York’s JFK airport and Heathrow before the tie-up. Starting next month, its venture with Virgin will operate nine nonstops between the New York area and London, and aim for flight times that are more convenient for business travelers.

That compares with 17 daily flights between the New York area and London from American Airlines and British Airways.

Delta-Virgin customers will also have greater choice flying to London from other parts of the United States as the two airlines fill holes in each other’s route maps.

“Delta prior to this merger was a player but not to the extent that it will be able to compete now,” said Goran Gligorovic, executive vice president with Omega World Travel, an agency that handles corporate contracts with airlines. “The more reach an airline has, either with alliances, code-shares or its own service, the more interesting partner it becomes for any corporation,” he said.

FENDING OFF THE CHALLENGE

American must work through labor problems, complete gate divestitures and meld computer systems following its exit from bankruptcy and merger with US Airways late last year. Now the world’s largest carrier by traffic, American will refresh its fleet with hundreds of new planes over the next few years.

American has put its flagship aircraft on the New York to London route: a new extended range Boeing 777-300 that has separate cabins for first and business class with fully reclining seats, as well as coach seats with power outlets and USB jacks. Late last year, American took an older 777 used on the route out of service to upgrade it with lie-flat seating, citing a need to be competitive with the Delta-Virgin venture.

Once the top carrier at both LaGuardia and JFK airports, American lost its lead over the past decade. Meanwhile, Delta added flights and upgraded facilities at Kennedy and LaGuardia, United merged with Continental and built a fortress hub in Newark and JetBlue Airways (JBLU.O) expanded at JFK.

American is now second behind Delta in passenger market share at LaGuardia, and ranks third at JFK, behind JetBlue and Delta, according to data for 2013 from the Port Authority of New York and New Jersey.

American faces an uphill battle “to re-gain in a place where Delta has staked a strong claim,” said aviation consultant Hamlin.

One area where the American-BA partnership has a strong hold is in first-class service, analysts said. Delta-Virgin and United offer business-class seats from the New York area.

“BA has cornered off large parts of the corporate travel market,” Goodbody analyst Donal O’Neill said. “That’s hard to compete against.”

The American-BA partnership operates more than 50 round-trip daily flights under its transatlantic venture, compared with more than 30 flights planned by Delta and Virgin.

And American-BA is adding flights. In early March, British Airways began service from Heathrow to Austin, Texas, with flights five days a week on a Boeing 787 Dreamliner.

O’Neill notes that British Airways has another advantage over Delta-Virgin with short-haul connections within Britain and Europe that bring more people to Heathrow and onto the transatlantic route.

The addition of US Airways hubs in Philadelphia and Charlotte, North Carolina, strengthened American’s East Coast U.S. reach and will help it gain corporate contracts, said Kurt Stache, the airline’s senior vice president of alliances.

In addition, American benefits from US Airways’ corporate accounts in New York and the Northeast, said Robert Mann, an aviation consultant in Port Washington, New York. “American is now going to battle back after having been either in retreat or certainly not quite as aggressive,” he said.

For a graphic showing passenger counts to London from various U.S. airports, see link.reuters.com/cyg97v

(Reporting by Karen Jacobs in Atlanta, additional reporting by Victoria Bryan in Frankfurt; Editing by Alwyn Scott, Christian Plumb and Frances Kerry)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/i8HmUZqVqJk/story01.htm

Analysis: Russia sell-off spurs hunt for bargains


NEW YORK (Reuters) – Rising tension between Russia and the West has rattled the country’s stock and bond markets, but some big money managers see the turbulence as an opportunity.

Russia’s equity market has plummeted 18 percent so far this year. Foreigners dumped the country’s stocks, bonds and the ruble following the early March invasion of Crimea, a territory of Ukraine. It now faces economic sanctions that could worsen if the crisis escalates.

Investors have reacted with their feet. The ruble is down nearly 9 percent on the year, and investors have pulled about $4.4 billion from stocks and $4.1 billion from bonds between September 2013 to the middle of March, according to the latest data from EPFR Global.

“Russia’s stock market right now is one of the cheapest in the world, and probably one of the most hated,” said investor and commodities guru Jim Rogers, chairman of Rogers Holdings, in Singapore. “This is the time to buy Russia.”

Those betting on Russia now should have a long-term horizon. After citizens in the Crimean peninsula voted for annexation by Russia, the United States and European Union reacted by issuing sanctions that, while limited in scope, could be broadened.

Russia’s economy has weakened as inflation has risen and investments have stalled. IMF data shows the country’s reserve assets declined to $493.3 billion in February from $509.6 billion in December as it has defended its currency. The central bank raised interest rates by 1.5 percentage points to stem the ruble’s fall.

Rogers, who has been investing in Russia for the last 1-1/2 years, said he bought Russian stocks last week. He said if more sanctions are imposed and the equities market declines further, there would be more buying opportunities in Russia.

Rogers said he is looking for non-energy companies – a tall order considering the RTS Index of 51 leading Russian companies is heavily skewed toward energy (58 percent of the index) and basic materials (13 percent).

Estimates from emerging and frontier market specialists FMG Funds, based in Malta, show that Russian stocks are trading at a price-earnings multiple of about four times 2014 earnings, with an annual dividend yield of 5 percent.

By comparison, the United States trades with a P/E ratio of nearly 16 times earnings and a dividend yield of just 2 percent, FMG data show.

FMG, which has $150 million in emerging and frontier market assets, is looking to scoop up more Russian stocks.

“We believe that Russian equities are at levels which make them a compelling buy and that patience will be rewarded,” said FMG chief investment officer Joe Portelli.

The largest equities in the RTS Index are Gazprom OAO and NK Lukoil OAO, each of which make up about 13 percent of the index. Gazprom’s forward price-to-earnings ratio is just 2.6, far lower than most other BRIC-nation energy companies, according to Thomson Reuters data.

“Russian stock prices could triple and they would still be at a valuation discount. But Russian companies are not nearing bankruptcy,” said Chris Darbyshire, chief investment officer at Seven Investment Management in London, which overseas assets of about $10 billion.

“In fact, expectations for Russian earnings this year have remained relatively steady, whereas expectations for most developed markets, including the United States, have fallen.”

Seven Investment invests in a broad range of emerging market stock and bond benchmarks, in which Russia represents about 6 percent and 10 percent of the total indexes.

“We would add (to positions) at some point,” Darbyshire said.

NO ESCALATION SEEN

The wild card is whether the saber-rattling between Russia and Ukraine will intensify, and how much it hurts the Russian economy. Growth there has slowed to less than 2 percent, inflation has risen and capital outflows have escalated.

Some investors are in a defensive mode. Standish Mellon Asset Management, which manages more than $180 billion in fixed income assets, pared its Russian dollar-denominated and local bond holdings during the recent crisis.

“We thought that whatever valuations we have in Russia, it’s better to exercise some caution,” said Cathy Elmore, emerging market portfolio manager and senior sovereign debt analyst at Standish in Boston. “We need to be aware of this political layer that has been driving valuations.”

Crimeans voted to secede from Ukraine and join Russia in a March 16 referendum. The United States and EU, worried that Russia could seek to take control of parts of eastern and southern Ukraine, have warned they could impose broader sanctions affecting entire sectors of Russia’s economy.

“It’s probably fair to say that the crisis will take its toll on (Russian) GDP (gross domestic product growth),” said Yakov Arnopolin, vice president and portfolio manager at Goldman Sachs Asset Management in New York.

At the peak of the Russian crisis in early March, the spread on Russian sovereign debt relative to Treasuries had widened to about 350 basis points on the JP Morgan EMBI+ benchmark debt index. It has since narrowed to about 260 basis points.

Yields on 10-year sovereign Russia debt climbed to 9.62 percent last week, the highest in about 2-1/2 years. It has since fallen to 9.17 percent, still an elevated level.

“On the sovereign and corporate debt level, Russia’s indebtedness remains very low. The impact on the economy is much more limited than what the current spreads imply,” said Goldman’s Arnopolin.

Goldman, which holds both Russian and Ukraine debt, said it has not made changes to its portfolio, maintaining a small overweight on Russia’s dollar-denominated debt. The firm has more than $349 billion in fixed income, currency, and commodity assets.

“Russia is not going away. This is a classic example of the market panicking, of throwing the baby out with the bath water,” said FMG’s Portelli.

“There’s a very good possibility that if you have a three- to five-year horizon, you’ll double your money in Russia.”

(Reporting by Daniel Bases and Gertrude Chavez-Dreyfuss; Editing by David Gaffen and Dan Grebler)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/IeT-0iRyPrY/story01.htm

Exclusive: Mt. Gox faced questions on handling client cash long before crisis


TOKYO (Reuters) – Two years before Mt. Gox filed for bankruptcy, a half dozen employees at the Tokyo-based bitcoin exchange challenged CEO Mark Karpeles over whether client money was being used to cover costs, according to three people who participated in the discussion.

The question of how Mt. Gox handled other people’s money – the issue raised by staff in the showdown with Karpeles in early 2012 – remains crucial to unraveling a multi-million dollar mystery under examination by authorities in Japan.

A bankruptcy administrator and police are seeking to determine how a Tokyo start-up that shot from obscurity to dominate global trade in bitcoin managed to lose more than $27 million in old-fashioned cash held in a bank as well as bitcoins worth close to $450 million at today’s prices.

The still-unresolved issue has thrown a spotlight on how Mt. Gox functioned as a hybrid between an online brokerage and an exchange. Essentially, the more than 1 million traders who used Mt. Gox at its peak had entrusted a 3-year-old firm to hold their money safely until they decided to cash out.

A court-appointed bankruptcy administrator on Friday said an initial examination of Mt. Gox – key to determining whether Mt. Gox’s users will be able to recover some of what they had on deposit with the exchange – would not be complete until May, citing the involvement of authorities in the case.

GROWING STRAINS

In interviews with Reuters, current and former employees at Mt. Gox described the strains that emerged over the handling of customer money just as the firm was gearing up for expansion and bitcoin was edging out of the shadows as an investment and a means of online settlement.

By early 2012, a small group of Mt. Gox employees, all of whom worked on one-year contracts, began to worry that customer funds had been diverted to cover operating costs that they estimated to be rising. Those costs included rent in a Tokyo high-rise that also housed offices for Hulu and Google, high-tech gadgets such as a robot and a 3-D printer and a souped-up, racing version of the Honda Civic imported from Britain for Karpeles, people who have reviewed expenses said.

Unlike Karpeles, the employees say they did not have access to the financial records of Mt. Gox. They asked for a formal meeting with the then-26-year-old Karpeles in early 2012, those involved said, and asked him to respond to their estimate that Mt. Gox was spending more than it was taking in. They were also concerned that company expenses were being paid from the same bank account used for customer deposits.

Karpeles told the group that customer money was not being used to fund the business, but declined to provide details on how the business had covered any loss. The meeting broke off after about an hour, those who participated said.

Several of the staff say they left the inconclusive meeting frustrated that Karpeles would not share proof that client deposits had been protected. For his part, Karpeles believed he had thwarted a challenge to his leadership by staff who had no right to see the books of a firm he owned and was funding, a person familiar with his thinking said.

Mt. Gox referred questions to its lawyers who had no immediate comment.

The former Mt. Gox employees who spoke to Reuters asked not to be named because of potential legal complications. Tokyo police have taken evidence from Mt. Gox in recent days as part of an early-stage inquiry into what the company has described as possible theft.

It is unclear how Japanese law would treat any such diversion of customer funds as Mt. Gox was not regulated as a financial institution. As a private firm in which Karpeles held an 88 percent stake with no declared debt, Mt. Gox was under no obligation to share any details on its finances.

ACCOUNTING

Mt. Gox said in its February 28 bankruptcy filing that hackers may have exploited what it called “a bug in the bitcoin system” to steal virtual currency from the exchange. It has not offered an explanation for the missing $27 million in cash.

By 2012, from its offices in Tokyo’s Shibuya neighborhood, Mt. Gox was handling at least $14 million in bitcoin trades per month, according to its estimates – equivalent to almost 90 percent of global trade in the digital currency at the time.

Mt. Gox’s only revenue came from a transaction fee initially set at 0.6 percent of trades and later discounted for big transactions, according to the company. Daily cash revenue for the exchange was just over $1,500, according to figures it posted on its website in August 2012 in a bid to reassure its traders that it was solvent.

The company’s accounting was complicated by it recording some revenue in bitcoin, which it used to cover some expenses, such as buying computer gear, a person who reviewed those transactions said.

By April 2013, up to $20 million was flowing into the exchange every day, with $300,000 being cashed out, Karpeles told Reuters in an interview then.

Karpeles was the only person at Mt. Gox who had access to the bank accounts, and each withdrawal request was handled manually, slowing the process, three former employees said.

In its bankruptcy filing Mt. Gox did not list what remained in its bank accounts, including Mizuho Bank, which had been its main bank in Japan. It said it owed 1.3 million bitcoin traders $55 million based on deposits it had taken.

(Additional reporting by Taro Fuse, Ritsuko Ando and Antoni Slodkowski; Editing by Kevin Krolicki and Ian Geoghegan)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/hQ6ISyMUVv0/story01.htm

Security firm Trustwave says Target data breach claims baseless


(Reuters) – Trustwave Holdings Inc, a credit-card security firm that has been sued along with Target Corp (TGT.N) over a sweeping data breach, said on Saturday it did not process cardholder data for the retailer or handle Target’s data security as a lawsuit alleges.

In a letter to customers and business partners, Trustwave Chief Executive Robert McCullen said the company’s connection to Target was not what had been portrayed in a suit filed last Monday by two banks seeking at least $5 million in damages.

“Contrary to the misstated allegations in the plaintiffs’ complaints, Target did not outsource its data security or IT obligations to Trustwave. Trustwave did not monitor Target’s network, nor did Trustwave process cardholder data for Target,” said the letter from McCullen posted on the company’s website.

“These claims against Trustwave are without merit,” the letter added.

The lawsuit filed in Chicago federal court by Trustmark National Bank and Green Bank NA accuses Target and Trustwave of failing to properly secure customer data, enabling the theft of about 40 million payment card records plus 70 million other records, including addresses and phone numbers.

The banks said they lost money from alerting customers to the breach, reimbursing fraudulent charges and reissuing cards. Those losses could increase, they said, if criminals ultimately use several million stolen cards as some analysts project.

While the complaint seeks unspecified damages of at least $5 million, New York-based Trustmark and Houston-based Green Bank said losses could top $1 billion for card issuers they hope to represent in a class action, and $18 billion for banks and retailers combined.

Target, the no. 3 U.S. retailer, already faces dozen of lawsuits over the breach, but the lawsuit filed on Monday appears to be the first to focus on Trustwave, a privately held Chicago-based provider of credit-card security services.

The data breach occurred from November 27, the big post-Thanksgiving shopping day known as Black Friday, to about December 15.

The case is Trustmark National Bank et al v. Target Corp et al, U.S. District Court, Northern District of Illinois, No. 14-02069.

(Reporting by Jonathan Stempel in New York, and Jim Finkle in Boston; Writing by Carey Gillam in Kansas City; Editing by Peter Cooney)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/JBKBfA8ZqeU/story01.htm

GM recall process will be under congressional microscope


DETROIT/WASHINGTON (Reuters) – When General Motors Co Chief Executive Mary Barra faces Congress next week she will have to explain how the top brass at the biggest U.S. automaker can say they knew nothing for more than a decade about a faulty ignition switch linked to crashes and at least 12 deaths.

For lawmakers trying to find who to blame for the lack of responsiveness by GM and its regulator to the tragedies, and in particular the multi-year delay in recalling potentially dangerous vehicles off the roads, it may turn out to be a frustrating couple of days.

GM built a system to deliberately keep senior executives out of the recall process. Instead, two small groups of employees in the vast GM bureaucracy were tasked with making recall decisions, a system GM says was meant to bring objective decisions.

It means that lawmakers may also focus on asking who is responsible for a system that failed so badly that there weren’t red flags raised for those higher up the food chain.

“In this day and age, to think that stuff like this can be kept quiet or forgotten is ridiculous,” independent auto analyst and author Maryann Keller said. “The right question to ask is who knew, when did they know and why was this not brought forth to be dealt with. Did they hope that it was just going to go away?”

The company has recalled 1.6 million cars for a problem first noted in 2001, spurring the congressional enquiries as well as investigations by federal safety regulators, who will also testify, the Justice Department, and GM itself.

GM has said Barra and other top executives did not learn of the defective switches until January 31, explaining that smaller groups of lower-level company executives are responsible for leading a recall. Some executives who might use this argument include former CEO Rick Wagoner and his immediate successor Fritz Henderson, who have not discussed the matter publicly.

“The process here is supposed to be drilling deep into the data and objectively looking at this and having peer groups question it, and senior management and leadership’s influence on that is not a healthy thing,” global product development chief Mark Reuss said last week.

GM spokesman Jim Cain said the company was not yet commenting on why the decision to recall took as long as it did. GM is still investigating, he added.

Within the GM community, several former executives contacted by Reuters were asking why the ignition switch problem did not catch the attention of company attorneys, engineers and employees who worked with dealers and processed warranty claims.

“Why did these dots not get connected? Or worse, if they were connected, why did it take so long to do something?” said one former executive with experience in service matters, who asked not to be identified and had not heard of the issue while it was developing.

When the ignition switch in older-model cars, including the Chevrolet Cobalt and Saturn Ion, is jostled, a key could turn off the car’s engine and disable airbags and other components, sometimes while traveling at high speed.

“Safety-related issues always got elevated attention,” said a former GM engineering executive. “Something like engine stalls would get high priority.”

Lawmakers will “ask questions that will hold people accountable for the terrible accidents that have occurred,” Representative Henry Waxman of California, the senior Democrat on the House Energy and Commerce Committee, which is conducting that chamber’s investigation of GM, told Reuters.

Barra will testify in the House on Tuesday and in the Senate on Wednesday.

Barra and the acting head of the National Highway Traffic Safety Administration, David Friedman, are likely to face a barrage of questions from skeptical lawmakers. They may also have to deal with accusations from victims’ families, some of whom plan to attend the hearings.

A lawyer for some victims’ families on Saturday invited Barra to meet with them in Washington next week.

“They need to hear from you, listen to your voice to know you are truly sorry and that you share in their grief and, to an extent at least, you understand their loss,” Robert Hilliard wrote in a letter emailed to Barra and GM lawyers.

GM spokesman Greg Martin said by e-mail: “Mary has expressed GM’s regret and deep sympathy for all of those affected by the recall. We are determined to earn our customers’ trust and to take actions necessary to make our safety processes world class. Arranging a meeting in the media is not respectful to the families. We will respond directly to the invitation.”

INSIDE GM’S RECALL PROCESS

For more than a decade the company carried out engineering and field evaluation inquiries to track the problem, according to a timeline that GM filed with regulators. That document and others also suggest a failure to share information within the company.

GM first learned of the issue in 2001 during pre-production of the Ion, and it issued so-called service bulletins to dealers with suggested remedies in 2005.

A February 2005 bulletin suggested dealers look for short drivers, who would be more likely to bump the steering wheel column, according to GM documents filed in a California lawsuit.

Meanwhile, in a GM document introduced last year in a Georgia lawsuit, 6-foot-3-inch GM engineer Onassis Matthews said he inadvertently turned the ignition key off with his knee while test driving a Saturn Ion in February 2004. Matthews suggested moving the ignition key to a different location.

As fatal accidents were reported, they were not always discussed broadly.

In March 2007, NHTSA officials told a group of GM employees of a fatal Cobalt crash in July 2005. GM’s legal team had opened a file in 2005, two months after the crash, but the automaker’s employees at the 2007 meeting with NHTSA were not aware of it.

In August 2011, an engineer was assigned to track a group of Cobalt and Pontiac G5 crashes in which the airbags did not deploy, but the process failed to include crashes involving Ion cars that resulted in deaths.

The issue was elevated to the two committees responsible for calling for recalls in 2013. GM declined to say if the committees had looked at the issue previously.

“Product recalls was a closely held activity,” said a former executive in the global product development organization.

The system served two purposes. First, it put a group of experts in charge of the decision. Second, it kept news of potential recalls from leaking, the person said.

One small group would vet incoming data and decide if a recall was warranted, then make a recommendation to an even smaller group in charge of approving the recall. If the second group approved a recall, the recommendation would then go to senior management.

Jim Heller, chair of the products liability practice at Philadelphia law firm Cozen O’Conner said top executives “can’t be involved in every consumer’s complaint, regardless of merit.”

However, Heller, who does not do work for GM, said a growing problem that would affect company earnings and public relations should have been communicated to senior management.

GM’s 2009 bankruptcy may also be part of the explanation, since it led to an exodus of executives, including Wagoner and Henderson, both of whom were forced out.

Members of Congress, as well as safety advocates, want to know whether senior GM executives may have learned of the issue long before it surfaced in late 2013 and led to last month’s recall.

Wagoner declined to comment through a spokesman, while Henderson could not be reached. Former North American chief Gary Cowger also could not be reached to comment.

GM’s former general counsel, Thomas Gottschalk, referred questions to the company, and GM said its current top legal executive Michael Millikin, who was previously the No. 2 executive in the department, also did not learn of the defective ignition switches until January 31. He is co-leading GM’s internal probe.

Lori Queen, who was previously in charge of GM’s small-car engineering when the Cobalt was introduced, said she and her husband James, who was in charge of global engineering, would not comment. Former purchasing chief Bo Andersson, who is now CEO of Russia’s largest automaker Avtovaz, also declined to comment.

A company spokesman said GM’s vice president of global product development Doug Parks, who was chief engineer for the Cobalt and Ion, was not commenting.

The two Congressional committees are likely to decide on additional hearings and witnesses after they digest GM and NHTSA documents they have received and the information gleaned from next week’s hearings.

LESSONS TO LEARN

Barra has repeatedly apologized for the company’s handling of the matter and said GM would focus on taking care of customers, and company officials have stressed cooperation in all investigations.

She may get some credit from lawmakers for that attempt at transparency.

GM’s CEO “gets high marks for admitting wrongdoing. On the other hand, she hasn’t been there very long,” said Senate Commerce Committee Chairman Jay Rockefeller, a West Virginia Democrat, who is overseeing the Senate hearing.

The senator said he would look at documents and listen to testimony before deciding about GM, and that the committee would be looking for explanations. “You have to have lessons,” he said.

(Additional reporting by Paul Lienert in Detroit, Megan Davies in Moscow, Doina Chiacu and Will Dunham in Washington; Editing by Peter Henderson, James Dalgleish and David Gregorio)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/H1LaU-nOki0/story01.htm

Dollar reserve role secure but set to shrink: BIS


BERLIN (Reuters) – The dollar’s share of central bank reserves may fall by as much as 10-15 percentage points in coming years without threatening its role as the world’s main reserve currency, a senior official from the Bank of International Settlements said on Saturday.

Peter Zoellner, head of the banking department at the central banks’ central bank, also told one of the year’s biggest gatherings of foreign exchange dealers that the role of China’s renminbi would continue to grow.

He said there were signs that moves by Beijing to weaken the yuan and end a decade of constant appreciation were pushing some interests towards its tightly controlled onshore market and that this might develop further in coming months.

He expected trading and central bank reserves held in the yuan to continue to expand “at a sustained pace” but saw no prospect that the Chinese currency could replace the dollar as the reserve of choice over the next couple of decades.

“It could happen that the percentage will go slightly down with the reserve currency from between 65 and 70 maybe to between 50 and 60 percent,” he told the ACI Financial Markets Association congress in Berlin.

“But the relative dominance of the United States dollar I do not believe that this will change for the next 10, 20 years.”

Shifts in currency allocations by central banks, many of whom decline to publish breakdowns of how much they hold in reserves in a particular currency, are closely-watched by foreign exchange markets.

BIS is the biggest repository for data on volumes, movements and trade in currencies worldwide. Its triennial survey last year showed volumes of trading had risen to an average of $5.3 trillion a day.

Zoellner said the expansion of yuan offshore trading was one factor behind that rise and said he expected China’s recent moves to prompt further change in how its currency regime, tightly controlled until now, operates.

“Most of the transactions over the last few years have been done in the offshore markets… but there is more and more activity in the domestic market in renminbi, quotas have been increased and so on,” he said.

The moves by China, mainly carried out by shifting its onshore reference rate for the yuan against the dollar steadily weaker, has driven a surge in yuan trading offshore and an almost 3 percent fall in the value of the yuan against the dollar, putting an end to one of the currency world’s few sure bets for steady appreciation.

“The Chinese authorities are doing something to break that expectation of low volatility and one way direction. This encouraged some of the speculative (investors) to do their short term trades in China,” Zoellner said.

“We will see how this works out, it has to be observed for the next couple of months.”

(Editing by Elaine Hardcastle)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/gYWrdBW3tq0/story01.htm

Exclusive: GM crash victims’ families who settled may revisit deals


(Reuters) – Two families who settled with General Motors Co over fatal crashes linked to faulty ignition switches are considering trying to overturn the agreements, after the company disclosed it had known about the issue for years.

The lawyer of one family said he could challenge the agreement, alleging that the automaker fraudulently covered up the problem, and his clients intended to try. A second family also told Reuters it is preparing to try to break the deal and then sue GM. Neither family has yet done so, however, and trying to win such actions will be difficult.

To undo a settlement, plaintiffs would have to convince a judge that they were intentionally misled or defrauded by the other party, according to legal experts and plaintiffs’ lawyers. If the families were successful in setting aside the settlements, they could then sue GM.

GM, which on Friday increased a global recall of vehicles because of the ignition switch problem by almost a million to nearly 2.6 million, declined to comment on specific suits or pending litigation. In a statement it said: “We deeply regret the circumstances that led to the recall. We have launched an internal review to give us an unvarnished report on what happened. We will hold ourselves accountable and improve our processes so our customers do not experience this again.”

Courts are often reluctant to undo settlements, which are the main means of resolving personal-injury and wrongful-death cases, said Frank Vandall, a professor at Emory University School of Law and a product-liability expert.

Each settlement would have to be challenged individually, since the deals depended on the laws of the state where the settlement was reached, the facts of the case and the terms of the individual agreement.

With a sophisticated litigant like GM at the table, it’s likely any agreement would be “very well-drafted and difficult” to break, Vandall said. Breaking a settlement also may mean that the family has to return any money they received, depending on the terms of the original agreement.

But if it emerges that GM continued to sell cars with the faulty ignition switch despite having evidence that it was a hazard, and intentionally misled opposing lawyers or omitted critical information, “judges might well set aside the settlement,” Vandall said.

Attorney Bob Hilliard, who is representing the family of Hasaya Chansuthus, who was killed in the 2009 crash of a 2006 Cobalt, said he believes the family has a case for fraud because GM hid the ignition switch issue. The family settled with GM in early 2011 and now they intend to overturn the deal and sue, he said.

“If GM conceals negligent facts…and they use that to pressure a settlement for pennies, while at the same time preventing any reasonable plaintiffs’ lawyer from discovering that the Cobalt had a death-causing defect, then that’s fraud,” said Hilliard in an interview. “The law abhors fraud.”

Another obstacle facing plaintiffs who seek to sue GM is that the automaker is not responsible under the terms of its bankruptcy exit for legal claims relating to incidents that took place before July 2009. Those claims must be brought against what remains of the “old” or pre-bankruptcy GM, legal analysts say.

To get around this difficulty, plaintiffs may attempt to argue that they should be allowed to sue the “new” GM over pre-bankruptcy actions. In doing so, they could invoke the theory of “successor liability,” meaning that the new GM should be held accountable for claims against the former company because they believe GM committed fraud, legal experts say.

FIRST DOCUMENTED DEATH

The adoptive parents of Amber Rose, who died at the age of 16 when the airbags failed to deploy as she crashed her 2005 Chevrolet Cobalt into a tree in Dentsville, Maryland in July 2005, say they are planning to try to overturn a settlement and sue GM. They reached an agreement with the automaker in February 2006 over what has become the first documented death linked to the faulty ignition switches.

Both Jim Rose and his former wife, Terry DiBattista, say they were never informed about the potentially defective ignition switches. GM had flagged problems with the switch to Chevrolet dealers in a service bulletin in February 2005, five months before Amber’s fatal crash.

But the GM lawyer who dealt with the Rose case did not mention the switch, presenting the settlement offer as “a courtesy” to her family, DiBattista said.

“I just found out three weeks ago about the ignition switch” that in some cases could shut the engine and airbags off in the Cobalt and other GM small cars, DiBattista told Reuters.

Amber’s birth mother, Laura Christian, is friends with DiBattista. The pair are traveling together with parents of other crash victims to Washington, DC, where lawmakers are holding hearings on the GM recall next week.

Christian said she is also planning to sue the automaker, even though she didn’t seek a settlement after her daughter’s death. Christian said she first contacted GM in September 2005, seeking to find out why the airbags did not deploy, “but nobody would ever speak to me.”

If the families go ahead with the lawsuits it would add to mounting litigation and a public relations crisis at the company, which faces congressional investigations, a criminal probe by the Department of Justice, an investigation by the National Highway Traffic Safety Administration, and an internal probe of its own.

Attorneys in several states have filed class action suits against GM, which also faces at least two wrongful-death suits from the families of crash victims who have not settled. Lawsuits in California and Alabama allege that GM knew of ignition-switch problems as early as 2001, but failed to take proper steps to fix the defects.

It’s unclear how many out-of-court settlements GM may have reached with families over accidents now linked to the faulty ignition. Reuters learned of at least three such settlements, which are subject to certain confidentiality agreements. GM declined to comment.

In addition to the two families who settled and are now considering suing, the family of Brooke Melton, who was killed in a 2010 accident involving a 2005 Cobalt, also reached a settlement but currently is not planning to sue, according to the family’s attorney Lance Cooper.

(Editing by Martin Howell and Peter Henderson)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/Ul9FyAFTvoI/story01.htm

U.S. judge OKs class action in e-book suit against Apple


NEW YORK (Reuters) – A federal judge in New York granted class certification on Friday to a group of consumers who sued Apple Inc for conspiring with five major publishers to fix e-book prices in violation of antitrust law.

U.S. District Judge Denise Cote said the plaintiffs had “more than met their burden” to allow them to sue as a group. She rejected Apple’s contentions that the claims were too different from each other, or that some plaintiffs were not harmed because some e-book prices fell.

“This is a paradigmatic antitrust class action,” wrote Cote, who has scheduled a trial later this year to determine damages, which could reach hundreds of millions of dollars.

An Apple spokeswoman declined to comment.

In July 2013, Cote found the technology company liable for colluding with the publishers after a separate non-jury trial in a case brought by the U.S. Department of Justice. Cote found that Apple took part in a price-fixing conspiracy to fight online retailer Amazon.com Inc’s dominance in the e-book market.

Apple is appealing that decision.

Thirty-three states and U.S. territories have separately sued on behalf of their consumers, while individual consumers in other states and territories filed the class action lawsuit that Cote addressed on Friday. The plaintiffs are seeking more than $800 million in damages.

The publishers previously agreed to settle related antitrust charges for $166 million before trial.

Apple has asked the 2nd U.S. Circuit Court of Appeals to throw out Cote’s ruling from last year, as well as her decision to appoint an external monitor to oversee the company’s antitrust compliance, a move Apple has called “radical” in court filings.

The 2nd Circuit last month rejected Apple’s request to halt the monitor’s oversight while its appeal is pending.

Cote on Friday also denied Apple’s motion to exclude the opinions of the plaintiffs’ damages expert. In a separate ruling, Cote largely threw out the opinions of Apple’s two damages experts, saying they were not based on “rigorous application of economic methods.”

Steve Berman of Hagens Berman Sobol Shapiro, the plaintiffs’ lead lawyer, said, “We are thrilled with the win.”

The trial will likely take place in either July or September.

The consolidated case is In Re: Electronic Books Antitrust Litigation, U.S. District Court for the Southern District of New York, No. 11-md-02293.

(Reporting by Joseph Ax; Editing by Jonathan Oatis)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/pDNqBUkhiac/story01.htm

Citigroup hurt by negligent auditing on failed stress test: Financial Times


(Reuters) – Weaknesses in auditing led to Citigroup Inc failing the U.S. Federal Reserve capital assessments, fueling fears that there is negligence in controls at the U.S. bank, the Financial Times reported on Friday citing executives and others sources familiar with the matter.

Executives at Citi are promising better auditing and anti-money laundering processes and will try to allay the concerns that led regulators to veto the bank’s plan to return more cash to shareholders, the newspaper reported on its website. (r.reuters.com/cer97v)

There is also tension brewing among the bank’s management, the business daily said citing company sources.

Citigroup’s Chief Executive Officer Mike Corbat had shown himself to be “overconfident” that he had repaired the bank’s rickety relationship with regulators and had “mistaken a ‘not bad’ relationship for a good relationship,” the business daily reported citing a senior executive.

Citigroup investors will likely have to wait until at least 2015 to receive an increase in dividends or stock buybacks after the Federal Reserve rejected its plan to return more capital to shareholders, the Wall Street Journal reported. (r.reuters.com/der97v)

A Citigroup representative was not immediately available to comment.

(Reporting by Lehar Maan in Bangalore; Editing by Lisa Shumaker)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/cVgiRL2Q6Wc/story01.htm