Archive: November, 2009
Investors who filed a $100 million lawsuit against accused Ponzi scheme operator Scott Rothstein and his bankers have added new claims about why Radnor investment manager Barry Bekkedam introduced clients to a fund that invested with Rothstein. Read and search the amended complaint here.
Federal prosecutors in Florida have said, in federal court filings, that Rothstein raised millions from investors to finance legal settlements in non-existent cases, and stashed part of the money in North African bank accounts. He hasn't been charged with a crime.
The suit alleges that Doug and Linda Von Allmen and others invested more than $100 million with Rothstein, through Florida businessman George Levin's Banyon Income Fund LP. It says they invested after Bekkedam, who the plaintiffs call a "promoter" of the Banyon fund, said that "Levin was personally worth over $400 million" and would "guarantee" the Rothstein settlements his fund planned to buy with their money.
"Black Friday is not the biggest shopping day of the year - that honor is held by the days immediately preceeding Christmas," notes Holly Guthrie, mall-watching retail-stock analyst at Boenning & Scattergood in West Conshohocken.
Still, the Friday after Thanksgiving ranks in the Top 10 shopping days. Plus, it's interesting to see what shoppers are responding to, and ignoring, this close to the end of the year. So Guthrie headed north to the giant King of Prussia shopping center, and spent 10 hours hitting her favorite publicly-traded chain stores, counting heads, checking prices, and kibitzing with customers and front-line staff.
Summary: By giving more stuff away, stores were able to lure more shoppers - but not enough to replace lower profit margins. "Coming out of Black Friday 2009, we believe that, although many retailers did experience an increase in traffic, few will be able to translate those gains into sizable profit increase."
"The developers who put together the deal that became the $429 million Harrah's Chester Casino & Racetrack in nearby Chester, Pa., are buying waterfront land in Wilmington for a casino project," reported the Wilmington News Journal here.
Philadelphia developer Kevin Flynn and Atlantic City lawyer George Miller have signed a deal to build on 20 acres in the desolate industrial district above where the Brandywine and Christina rivers meet, Maureen Milford wrote.
But first, Delaware's gambling-friendly Gov. Jack Markell and his Democratic allies who control the state legislature must approve. Milford lists alternate sites where slots parlors could rise in Wilmington.
American International Group, the giant insurer bailed out by the Bush administration and kept afloat under Obama as it tries to sell assets and raise cash to pay back taxpayers, "has an $11 billion shortfall in reserves to pay property-casualty claims that may hinder efforts to repay the government," reports Bloomberg LP, citing a report by Sanford C. Bernstein Research analyst Todd Bault.
Bault called AIG's Chartis group, which includes National Union and other Pennsylvania Insurance Department-regulated businesses, "aggressive" in pricing workers' compensation, executive liability and other property and casualty policies. It will have to prove to state insurance regulators it can pay those claims before it will be able to pay back federal investments - but state filings show AIG will have to raise billions before that can happen, according to Bault. He cut his AIG price target today to $12, from $20.
PA Insurance Commissioner Joel Ario and his state-regulator peers have assured us AIG's insurance businesses are solvent, and carefully regulated, and they're not why the company is in trouble, here and here, for example. They say it was AIG's New York investment office, regulated by the federal Office of Thrift Supervision, not its insurance operations, regulated by Pennsylvania (property and casualty), Delaware (life and health), and other states, that lost all the money that brought federal intervention last year.
Toronto-Dominion Bank's US unit "has very significant exposure" to US commercial real estate losses resulting from its 2007 acquisition of Cherry Hill-based Commerce Bancorp, warns analyst Rob Wessel of Hamilton Capital, citing US regulatory filings, in a report described in this Toronto Globe and Mail article.
"Prior to TD's acquisition of Commerce," Commerce's commercial real estate portfolio grew "from $2.9-billion in 2003 to $6.6-billion in 2007," the period covering the biggest inflation in US property values and the riskiest lending, the report adds. “Such rapid loan growth is generally a red flag."
Of course, much of Commerce's attraction to TD was the Cherry Hill bank's rapid growth, which started a lot before 2003. Wessel also noted that Commerce had relatively few risky construction loans. For its part, TD warned the newspaper against "confusing and misleading interpretations."
The high-rise Persian Gulf city-state of Dubai, in the United Arab Emirates, was one of the last financial centers to suffer the global slowdown that started in 2007. For a little while, it even looked like a refuge, a place where oil money that had stopped flowing to Western markets might keep the boom going.
But now reports Dubai is broke, and may drag down European banks and neighboring Abu Dhabi - have spooked the US stock market (down 1.5% this morning), and especially "emerging" foreign markets (down nearly 5% in two days), while trimming Marlton-based Hill International (down 6% this morning), whose construction management unit boasts more than the typical US share of Arab jobs.
NEW: Bank analyst Richard X. Bove told clients in a note this morning the Dubai blow-up could benefit the US dollar in the short term by driving worried foriegn investors to US assets. US banks aren't directly affected, but could suffer in the long term as their investment partners abroad write off Dubai losses.
From a memo to Capmark employees yesterday, by boss Jay Levine, after federal bankruptcy court in Delaware agreed for the company to sell its mortgage-banking and loan-servicing business to Warren Buffett-backed Berkadia (Berkshire Hathaway - Leucadia joint venture), for an adjusted $515 million, apparently preserving most of the company's 500-plus jobs at its Horsham headquarters and 1,000 elsewhere in the U.S. from a potential rival bid by rival PNC's Midland Mortgage:
"Today was a good day for Capmark.
"We had our first lengthy session back in Court to gain clarity on a number of First Day items that required further process, follow up and ultimately confirmation by an Order...
"The Court approved the sale of our North American Servicing and Mortgage Banking business to Berkadia. That the business could stay intact and employees keep their jobs were two of the benefits cited by Judge Sontchi in his approval.
"This outcome has been quite uncertain for almost a month, since we first received the indication of interest from PNC/Midland. This past month has been stressful in many ways, and I cannot tell you how professionally the entire company has handled the many twists and roundabouts this process threw at us...
"Remarkably, through this uncertainty we have continued to close and deliver new loans to Fannie, Freddie and Ginnie Mae. Without the strong support of the agencies and loyal borrowers, we would not be in the position to complete the sale... Transition planning will shift into high gear after Thanksgiving, and we hope to close the sale as early as possible in December...
"All salaries and benefits such as healthcare... have been confirmed in today’s Final Order. Today we also received approval for our bonus and severance plans...We will communicate specifics directly after the December 10th hearing...
"On behalf of the entire Executive Committee, I would like to thank each and every one of you for your hard work and dedication during the uncertainties of the last month. My best wishes to you and your families for a happy and healthy holiday."
In the late 1970s, Congress, the Carter administration and the Supreme Court stopped US enforcement of the old Judeo-Christian concept of usury - that it's wrong to charge too much interest on loans - by allowing credit card companies to "export" interest rates from business-friendly states like Delaware and South Dakota, bypassing limits in other states.
Now Congress is starting to talk about setting limits again. Rep. Louise Slaughter, D-NY, writes that she plans "dramatic legislation that would cap annual credit card interest rates at 16%," alongside Reps. John Tierney and Michael Capuano, both D-Mass, "as soon as Congress returns from Thanksgiing break."
16% is a little more than today's industry average, and about half what card banks charge people with damaged credit. The "Renewing America's Committment to Consumers Act" would also limit late and annual fees, and allow states to enforce stricter laws.
"A great way to help Americans would be to again put a reasonable cap on ridiculously high credit card interest rates," Slaughter says in a statement. "Things were a lot better for the average person in this country when we had usury caps. Watching how credit card companies have exploited people by increasing rates up to 30 percent and more is criminal and this bill will allow us to put an end to this practice."
Would a ban result in fewer desperate people borrowing money they can't afford at high rates of interest? Or would it just give ultra-high-interest payday lenders and Larry the Leg-Breaker new customers, at banks' expense?
It's bad times when Main Street gives up on borrowing money - while City Hall keeps trying to borrow more.
That's what's going on in Pennsylvania, according to a new report from the Chrostwaite Institute, an affiliate of the Pennsylvania Association of Boroughs. The group surveyed 16 senior lending officers (that's who replied, of 60 surveyed), and found that, in July, August and September:
- 38% of the banks set tougher standards for businesses to borrow money. None made it easier
- 56% charged more for loans, compared to what it costs them to raise money.
- 69% said they're making smaller loans; most are demanding borrowers show they're more solvent.
This clip shows Barry Bekkedam, head of Radnor-based Ballamor Capital, which manages $1.8 billion for over 100 wealthy investors, at a public pension fund conference earlier this year, talking about investing $100 million for an unnamed legal-settlements investment fund, which he said he helped structure.
Also more from the Fort Lauderdale Sun-Sentinel about legal-settlements investor Scott Rothstein, who federal prosecutors say was running a "Ponzi scheme": Documents filed in federal court in Miami say the settlements didn't really exist, and Rothstein was stashing millions in Morocco. Ballamor says its clients invested $30 million with Rothstein. Previous PhillyDeals column and blog item.
Revised Update: Bekkedam said, in the video, that he was working on the proposed settlements investment with Pennsylvania's state treasurer. Bekkedam and Treasurer Rob McCord know each other; they once had neighboring offices in Wayne. But, says McCord aide John Lisko, Ballamor and Bekkedam don't invest money for the state (and, Lisko adds, state money wasn't invested in the Banyon Income fund that backed Rothstein.)
