Goldman CEO fights back on SEC charges

Lloyd Blankfein on Wednesday attacked the Securities & Exchange Commission's fraud charges in telephone calls to clients as Goldman escalated its campaign to stem the damage to the firm's reputation.
One person who received a call from the Goldman chief said he was told the regulator's case against the bank was politically motivated and would ultimately "hurt America".
Mr Blankfein mounted the campaign to bolster the confidence of its business partners in the wake of the SEC charges that the bank had sold investors a security designed to fail.
In the conversations with private equity executives and others, Mr Blankfein left clients with the impression that he was eager to fight the charges in court. The SEC has requested a jury trial. "He was very aggressive," said one person called by Mr Blankfein on Wednesday. "He feels that the government is out to kill them, that they are under attack and the whole thing is totally political." Mr Blankfein said the SEC action "hurts America", this person said.
Mr Blankfein did not initiate talk about the politics or timing of the SEC charge, announced on Friday. A person familiar with the matter said: "Clients brought up the politics ... and there was a discussion around the context of what happened."

Mr Blankfein's charm offensive with clients came as it emerged that Fabrice Tourre, the Goldman employee also named in the SEC case, would appear with him next week before a US Senate panel investigating Wall Street's role in the financial crisis.
Mr Blankfein said a female staffer at ACA, the manager of the security, new that Paulson & Co intended to bet against the transaction, according to a person that was called. This goes against the SEC charges that Goldman failed to disclose that Paulson was taking the opposite side of the deal. Paulson's short position yielded it a profit of about $1bn while investors who bought into the security lost $1bn, the SEC complaint says.
Goldman this week bolstered its legal team by hiring Greg Craig, a former counsel to the Obama White House. Though Mr Blankfein did not indicate on the calls whether he was considering settling the suit, some clients close to Goldman say they believe it is gearing up for a fight. "They will likely fight aggressively and hope to win clean," the person said.
SEC staff have said that regulators would seek disgorgement of Goldman's profits on the transaction as well as penalties and injunctive relief.
Goldman maintains it made a loss on the transaction. But its argument was hurt by the disclosure on Wednesday that the loss resulted from a failure to sell some positions in the deal.

Mobile app developers tackle Africa's biggest problems

Growing up on a dairy farm in central Kenya, Amos Gichamba says he watched farmers be exploited by the people who bought their cows' milk and sold it to dairy companies.
"The price of milk at the farmer level is very low compared to how much it's sold to consumers. So they end up getting very little money for a lot of work," he said by phone.
The problem, he thought, was one of information. The rural farmers didn't know how much they could charge for their cows' milk. They didn't know what rates dairy farmers other villages were being paid. And without a sense of current market conditions, they weren't sure when to ramp up or slow down production. All of this made them easy targets for scams.
So, with all that in mind, Gichamba, 26, decided to create what he sees as the perfect technological solution for the farmers: a mobile phone app.
He created a text message-based system that lets farmers send questions to a computer. When the app launches at the end of April, a machine will match up farmers' queries with a database of information about local dairy markets -- and then spit answers back in 140 characters or less.
"As Africans, we are the ones who understand Africa the best," he said. "We see situations from the ground. We are involved with what's happening. So, when we are coming up with solutions, we come up with solutions for problems we know."
Gichamba is one of a number of mobile app developers to crop up in Africa in recent years. While developers in the United States rush to make flashy games for Apple's latest gizmo, the iPad, these young developers are trying to tackle Africa's most vexing problems.
Many are doing so with simple text message applications on phones that cost no more than $25.
Text message phone apps now help African people check market prices, transfer money, learn languages and alert authorities to the need for food or other aid in the event of a disaster. And this all comes despite Africa's reputation as the "least wired" continent in the world.
The work of these mobile developers is buoyed in part by the fact that while wired telephone lines and broadband Internet connections are very rare in Africa, cell phone use is exploding.
Mobile phone subscriptions in Africa are growing at a rate of about 50 percent per year in recent years, faster than that of any other continent, according to the International Telecommunication Union. A 2009 ITU report found 28 percent of people in Africa have a mobile phone subscription. By contrast, only 5 percent of people there use the Internet, the ITU says.
In Jessica Colaco's view, the ubiquity of mobile phones makes them vehicles for social change.
The 27-year-old mobile developer says that in some ways, Africa is taking the lead in developing apps that can be used in rural places and can improve livelihoods.
"What we need is more evangelism," she said. "People need to know what Africa is doing -- and how they can adopt from us."
Colaco, who is also a researcher at Strathmore University in Nairobi, Kenya, started a "boot camp" program for young people who want to become app developers. So far, she's held two sessions with 100 participants each, she said, and she has plans for more.
The group has inspired competition and yielded tangible results, she said.
One student, for instance, created a text message app that alerts fishermen when fish trigger sensors in a certain area of a local lake, she said. That way, the fishermen will know exactly where and when to put their lines in the water.
"People in the environment know exactly what they need," Colaco told CNN.
Colaco said African technologists should emulate the successes of Western companies like Apple and Google, but they must work on ideas that work specifically in local conditions.
Her first mobile app was a smartphone map of Nairobi. It came out in 2007, before Google had published detailed maps of the area, she said. She lived there, so she knew that a mobile map would be useful -- and that one didn't exist.
Other developers relayed similar experiences.
Ory Okolloh started the mobile-informed Web site Ushahidi after she traveled to Kenya to vote in the 2007 elections, which turned violent. She posted reports about the violence on her blog, and she asked people to tell their own stories as comments to her posts.
The comment fields filled up so quickly that she thought to create a site where people could share their stories by text message immediately after a crisis. She paired those reports with a map to make the data more useful for crisis responders.
Okolloh emphasized the site is a team effort, with 10 full-time staff members now.
The code that supports the site is available for free and has been used in several disasters since, including the January earthquake in Haiti and the "snowmageddon" storm in Washington, D.C., this February.
"At the heart of apps that have been successful and that will continue to be successful are apps that are practical and allow people to do something that they weren't able to do before -- either with a bank account or to communicate, which is at the heart of Ushahidi ... to allow people to get their story out," she said by phone from Johannesburg, South Africa, where she lives now.
Okolloh said people should be able to develop apps that work all over the world, "whether they're in Alaska or in Timbuktu."
But Africa has a history of "tinkering" -- led by people who learn by necessity to make the most of their limited resources -- that gives the continent's app developers a certain creative, make-it-work determination, she said.
"Just the art of tinkering and making something out of nothing has a long history and tradition that still goes on," she said. "What you're begging to see is shifting that mindset of making something out of nothing into technology."
A number of barriers remain for app development and tech deployment in Africa.
Jon Gosier, founder of a Uganda-based company called Appfrica, said some people aren't comfortable getting information through text, or don't know how to send accurate queries to text-based apps. Others simply can't read. His company tested a call-center model, also tried in India, where farmers can call a free hotline to get information about crop disease.
The number of farmers who use cell phone apps is relatively small, he said.
"I think it's being tried a lot and I think there's a lot of use, but it has to be more ingrained just in, like, people's daily workflow than it is," he said.
Developers said smartphones will have to get much cheaper in order for masses of people to purchase them. The mobile Web and wired broadband connections also have to improve in Africa for tech innovation to make the next leap, the developers said.
And the use of text messaging to get information from a database or an entire social network is relatively new for most people, who tend to think of phones only for one-on-one communication, according to Gichamba, the former farmer in Kenya.
But the African app makers seem largely hopeful.
Gichamba says the phone, especially when enabled with apps, has the power to change people's lives.

Bangkok battles hit tourist industry

Thailand's political turmoil which culminated in the weekend's running street battles is starting to take its toll on tourism, the lifeblood of the economy.
More than 40 countries have issued travel warnings amid reports of thousands of tourists cancelling trips.
The Ministry of Finance said growth in gross domestic product, once estimated at 3.5 to 4.5 per cent for 2010, would be cut by 0.2 to 0.5 per cent because of the unrest. Eknitti Nitithanprapar, executive director of the macro-economic policy bureau at the finance ministry, said tourism and consumption-related industries would be hardest hit.
The severity of the blow was felt on the stock market on Monday, where shares in the travel and leisure sector were hard hit. Thai Airways shares were down 13.6 per cent, contributing to a market fall of 3.6 per cent.
The SET Index, which until last week had proved remarkably resilient to the month-long anti-government demonstrations, has now lost 6.4 per cent since the government of Abhisit Vejjajiva, the prime minister, invoked a state of emergency last Wednesday.
Tourism, which draws visitors to the temples of Bangkok, the beaches of the Andaman Sea and the mountains of northern Thailand, accounts for almost 7 per cent of GDP, and is an important source of employment.
The family of Tomas Oyarzun, a 19-year-old from Chile, who arrived on Saturday to stay in Bangkok's Khao San Road on the fringe of the fighting, are cutting short their holiday and going to Bali.
"It feels strange here," said Mr Oyarzun, echoing the feelings of many other visitors interviewed by the Financial Times on Monday in the wake of the violence that left 21 people dead.
Tourists party near shrines for Bangkok protest dead

Vichit Prakobgosol, president of the Thai-Chinese Tourism Alliance Association, told the Bangkok Post the violence had led to cancellations of all charter flights from China. Charter flights for holidays during this week's Thai Songkran new year festival had already dropped to just 30 from 100 even before the violence.
"But now all charter flights from China have been cancelled," he said. "We don't want to talk about it any more. Violence is not the right answer and is not good for the country. Everyone, the red shirts included, will be affected."
iReport: Were you there? Send your images, video
Dale Lawrence of the Pacific Asia Travel Association said there was "a dark cloud hanging over the travel and tourism industry. You can't blame people for making alternative plans -- there is no end in sight."
But Mr Lawrence pointed out that Thailand's tourism market had proved robust in the past. Tourist numbers last year were marginally up on 2008 despite the global downturn and the closure of Bangkok's two main airports by protests in December 2008.
Mr Lawrence said the 'Mice' market -- meetings, incentive travel, conferences and exhibitions -- is likely to have been badly hit. Many companies are unable to get insurance to send executives to countries with travel bans in place.
iReport: Watch an eyewitness video of protests
The Thai government set up a scheme over the weekend offering coverage of up to $10,000 for loss of life or a limb and up to $100 a day for losses or damages.
The demonstrators who took on troops on Saturday have been campaigning for a month for Mr Abhisit's resignation. The street battles erupted when soldiers moved in to clear one of the main protest sites near the Khao San Road.
One end of the road still looks like a warzone, with a shrine marking where a protester died. But 40 yards away, western backpackers on Monday were celebrating Songkran with music and water-pistol fights. Businesses said it was a quieter festival than normal, but it was going ahead.
Mr Oyarzun, when asked if he would come back to Thailand after what he had seen, gave a one-word answer: "Definitely".

Report: Airline industry performance up

The performance of the airline industry improved in 2009, compared with the previous year, according to an annual report released Monday.
The 2010 Airline Quality Rating report compiles information on 18 U.S. airlines based on factors such as on-time arrivals, denied boardings, mishandled baggage and customer complaints.
Overall, the airline industry recorded the third-highest score in the 19 years researchers have tracked their performance, the report said.
Fourteen airlines improved their on-time arrival performance in 2009, the report said, though only six airlines had an on-time percentage greater than 80 percent.
Customer complaints fell industrywide to 0.97 per 100,000 passengers, from 1.15 per 100,000 passengers.
The Airline Quality Rating report is a joint research project by Purdue and Wichita State universities. The study is based on figures compiled by the U.S. Department of Transportation.
Hawaiian Airlines had the best on-time performance for 2009, with 92.1 percent. With 69 percent on-time arrivals, Comair recorded the industry's lowest rate in this category, the report said.

The report said Hawaiian was the best-performing airline in 2009, followed closely by AirTran Airways. JetBlue, Northwest and Southwest rounded up the top five.
Among major carriers, Continental was ranked sixth, U.S. Airways eighth, American ninth, United 13th and Delta 15th.
Compared with 2008, the airline industry scored higher in every category except for denied boardings, which shouldn't come as a surprise, said Dean Headley, a Wichita State professor and one of the report's authors.
"You would expect denied boardings to increase as you tighten up on the number of seats that are available," Headley said in a statement. "When you look at the past 10 years, you find that the airline industry performs most efficiently when the system isn't stressed by high passenger volume."
There's also an explanation for why the airlines did better in the other areas, said Claes Fornell, a professor of business at the University of Michigan and creator of the American Customer Satisfaction Index.
"What has happened is that because there are fewer flights, fewer passengers, you know airlines have been able to lose fewer bags and arrive on time more often, and that's what's driving the numbers up," he said.
"But of course they are losing money also, so this is not a sign that the airlines have really improved. It's a sign of weak demand, and it's easy to handle fewer customers than many customers."
Joe Brancatelli, who flies several times a month and runs JoeSentMe.com, a Web site for business travelers, said he is no fan of the report.
The report "is such a small part of the overall experience, it's almost unimportant, in my opinion," he said.
"There is nothing in this that the government hasn't already reported and it doesn't address the issues the government doesn't address, which is the waits at airports, the fact that there are no empty seats on the plane, which makes the experience terrible, the fee issue -- all those things also go into the experience."
One of the reasons why low-cost carriers are at the top of the ranking is because people know what to expect from their experience, Brancatelli said.
"The ones that do the best -- JetBlue, Southwest, AirTran -- it's not that they're smaller, it's that they're more consistent. They do the same thing every flight, every seat, every route, every day," he said.

Markets rally on Greek aid resolution

Share prices in Athens rose 3.5 per cent, their biggest one-day gain since early January. Bank stocks jumped more than 6 per cent after heavy losses last week.

“The solid form given to the Greek aid package, whether they use it or not, has given the market a much-needed psychological boost,” said Mike Berg, strategist at 4Cast consultancy.
The euro also benefited. The currency enjoyed its best single-day gain since August last year, adding 1.43 per cent before easing to $1.3583, up 0.7 per cent by mid-afternoon in New York. Two-year Greek borrowing costs fell 0.78 percentage points to 6.11 per cent, having dropped as low as 5.42 per cent in early trade.
The Greek government is set on Tuesday to borrow €1.2bn in six and 12-month loans to repay existing debts. The sale is expected to go smoothly.
However, former International Monetary Fund officials said there was uncertainty over how the eurozone would work with the IMF, which would be involved in a rescue.

Morris Goldstein, a former deputy director of the fund’s research department, said the lines of responsibility in the emerging deal were unclear.
Mr Goldstein said both groups might want to take the lead should Greece ask for aid.
The fund, he said, would insist on playing a leading role in setting the conditions for lending. These were likely to involve tough fiscal targets, more transparency on public finance data and possibly some structural reform to hold down wages and reduce costly pension rights.
“This has the makings of a strange dog’s breakfast,” said Mr Goldstein. “If a regional grouping can set IMF conditionality, what is the point of the fund anyway? This could create a very dangerous precedent.”
The rescue package agreed by eurozone members at the weekend would set interest rates of about 5 per cent – higher than eurozone countries’ own borrowing costs, but lower than the levels available to Greece in the markets.
Analysts said the details of the rescue plan had left questions unanswered, including whether it implied that eurozone members were now liable for each others’ debts.
The ongoing struggles of the eurozone to reach a deal have also left a “sour taste” in investors’ mouths, said Simon Derrick, head of currency strategy at Bank of New York Mellon.

Can a Russian Silicon Valley Spur Tech Innovation?

The Kremlin wants to engineer its own Silicon Valley. In a plan that was revealed in February, the Russian high-tech haven will come complete with new-wave architecture and all the comforts of a resort, a place for Russian geniuses to get together and invent the biggest thing since, well, the Internet. That's the hope, anyway. President Dmitri Medvedev, who has cultivated the image of a tech-savvy liberal, is staking much of his economic vision on the plan's success. And Russia has a resource that other nations envy: a fervid hacker culture with a reputation for excellence, or at least daring.
Since the Soviet collapse, no major platforms have emerged in Russia for its computer experts to innovate. As a result, many of them have emigrated, while many others have turned to hacking, a field in which Russians seem to excel. In January, police arrested a 40-year-old computer whiz for hacking into a Moscow advertising mainframe and turning a giant billboard display into a clip of hard-core pornography over one of the city's main streets. To avoid detection, the man had routed his attack through a proxy in Chechnya, a sophisticated trick. But for all his skills, the man was found to be unemployed. He told police he had done it "just to give people a laugh." The Russian government's idea now seems to be giving minds like his something more productive to do. (See 10 ways Twitter will change American business.)
That ambition, at least, is admirable. But for all Medvedev's project evokes of free thinkers brainstorming in a park, it still has a distinctly Soviet feel. It relies on central planning rather than a movement of geeks in garages, and it will be managed by the state. What it reveals, experts say, is the irreconcilable conflict between the Kremlin's new-age ambitions and age-old desire to control.
The government has clear goals. It wants the denizens of its Silicon Valley to hatch lucrative inventions that will help break the economy's dependence on the sale of oil and gas. "The appearance of great ideas, like life itself, is still considered a miracle," said the Kremlin's chief ideologist, Vladislav Surkov, who laid out the project in a rare interview with Vedomosti, a Russian business daily, on Feb. 15. "There are, of course, no miracle workers among bureaucrats and businessmen, but together we need to create an environment where miracles are possible." (See how hackers crippled Twitter.)
Surkov, officially Medvedev's deputy chief of staff, said that Prime Minister Vladimir Putin had approved the idea of a Russian Silicon Valley after Medvedev came up with it. Surkov said he himself had been assigned to oversee its creation, most likely on the outskirts of Moscow. It is an unusual role for him. Both under Putin's presidency between 2000 and 2008 and now under Medvedev's, Surkov has been widely seen as Russia's éminence grise. He is the author of the "sovereign democracy" theory that underpins Russia's neo-authoritarianism and the engineer of the Kremlin youth group Nashi, which uses strategic thuggery to discourage opposition. Now he has embraced his role as Russia's innovation guru.
He has been doing his homework. In January, he traveled to MIT to take part in a two-day seminar on innovation, visiting the kinds of labs, design rooms and incubators where new technologies are born. Two weeks ago in Moscow, he hosted a delegation from the real Silicon Valley that included top executives from eBay, Twitter and Cisco Systems. The actor Ashton Kutcher also came along, and documented the visit on his Twitter feed. "Russia is building their own Silicon valley. And they want help," Kutcher tweeted on Feb. 18. "If we rebuilt it today what would we do differently?"

How to nominate a CNN Hero

Great things can happen to those nominated as CNN Heroes:
• Anne Mahlum's Philadelphia running program is now helping the homeless get "back on their feet" in Baltimore and Washington.
• Doc Hendley's 'Wine to Water' organization, which works in three continents, is building sustainable water filtration systems in earthquake-ravaged Haiti.
• Jordan Thomas, 20, has raised more than $500,000 to provide prosthetics to underserved children -- including Haiti.
What do they have in common? Each was selected as a CNN Hero after being nominated by someone like you -- someone who wanted us to share their story with the world.
Enter your nominations at CNN.com/Heroes
Now your nomination of a 2010 CNN Hero could help the person that inspires you achieve even greater recognition and success.
Do you know someone who should be recognized as a CNN Hero? Here are some suggestions we hope will help you in crafting your nomination.

• Think about what makes your hero special. Ask yourself: What makes my nominee unique? What specific accomplishment has he or she achieved that is truly remarkable? What impact has their work had on others? We encourage you to watch videos of previous CNN Heroes to familiarize yourself with the achievements of the inspiring individuals we honor as "everyday people changing the world."
• Take a look at our nomination form. We suggest you review the information requested about yourself, your nominee and their work before filling out your submission.
• Tell us about your hero! Take your time and write from the heart. Remember: What you share -- in your own words -- is the most important factor in advancing a nomination for further consideration. You can enter your answers to the essay questions directly on the form, or write them first in a word-processing document and "cut-and-paste" them into each answer field. Please note that the information you provide will be used in accordance with our privacy policy.
• Click "Submit." If your nomination has been successfully transmitted, you'll see a "thank you" message on your screen. If you provided us with your e-mail address, we'll also send a confirmation that your nomination has been received. And yes, we read each and every one.
That's it! Nominations for 2010 CNN Heroes remain open through August 1.
Frequently Asked Questions
Q: Who is eligible to be considered as a CNN Hero?
A: Nominations must be in the name of a single individual, at least 13 years of age, whose accomplishment occurred (or continued) after November 26, 2009. Nominees in the "Young Wonder" category must be 25 years of age or younger. Groups and organizations are ineligible for consideration. Citizens of voided countries are also ineligible. For complete details on eligibility requirements and other rules governing selection of CNN Heroes, please read our Legal Disclosures.
Q: How will I know if my hero is selected?
A: Because of the high volume of nominations received, we cannot respond individually to each submission. However, if your nomination advances, we will contact you and your nominee through the contact information you provide.
Q: What if I don't know my nominee's address, e-mail, and telephone number?
A: Please make every effort to provide as much contact information as possible. We require either an email address or telephone number so we may quickly contact your nominee to obtain their permission for consideration as a CNN Hero.
Q: May I submit additional supportive information about my nominee?
A: There's space at the end of the form to provide links to articles or Web sites with more information about your hero. Please do not send additional materials unless requested.
Q: May I mail or fax my nomination?
A: No. All nominations must be submitted online through our Web site.
Q: What if my nomination form is rejected?
A: When filling out your form, please note that certain information is required. Those fields are marked with an asterisk (*). If you are not certain of your hero's nationality, select "Other" from the country drop-down menu. Likewise, if you're unsure which category their cause belongs in, just click "Other."
CNN is not responsible for technical problems that may prevent your submission from being successfully transmitted. You may wish to first write and save the answers to essay questions in a word-processing document. That way, if you need to re-submit your nomination, you can "cut-and-paste" those answers into the form without re-writing them.
Q: Can I buy tickets to "CNN Heroes: An All-Star Tribute"?
A: Unfortunately, seating for our November telecast is limited and by invitation only. Airdates and times for the global broadcast of "CNN Heroes: An All-Star Tribute" will be announced later this year.