Manhattan, NY, United States (AHN) – The New York prosecutor subpoenaed American bank Goldman Sachs to investigate the institution’s role into the credit crisis.

The court summons is in relation to the U.S. Senate Permanent Subcommittee on Investigation’s report that accused Goldman Sachs of misleading buyers of mortgage-linked investments as one of the reasons behind the collapse of the financial markets.

Reports said that Manhattan District Attorney Cyrus Vance Jr. is studying the possibility of initiating civil proceedings against Goldman Sachs on the basis of the subcommittee’s report. But any case that Vance could file would not lead to the filing of criminal charges against the bank or its employees.

Goldman Sachs declined to comment on specific regulatory or legal issues, but said receiving subpoenas are a normal part of the judicial system’s information request process. The bank promised to cooperate fully with the ongoing investigation.

Shares of Goldman Sachs dropped 16 percent in New York trading since the subcommittee report was released in April. On Thursday, the bank’s stocks went down 1.3 percent to $134.38 at the New York Stock Exchange composite trading.

In 2010 Goldman Sachs was penalized by the U.S. Securities and Exchange Commission over claims related to the bank’s marketing of complex securities known as collateralized debt obligations. The settlement was over claims that Goldman Sachs did not disclosed that hedge fund Paulson & Company was betting against and influenced the selection of CDOs that the bank was packaging and selling.

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New York, NY, United States (AHN) – Two funds have filed a lawsuit against British bank Hong Kong and Shanghai Banking Corporation for profiting from hedge fund Bernard Madoff’s Ponzi scheme.

Alpha Prime Fund and Senator Fund filed a claim against HSBC before a New York bankruptcy court on Friday. The two funds said HSBC served as custodian of Madoff’s funds and failed in its duty to monitor the discredited banker.

It is the second claim filed against HSBC after Madoff trustee, lawyer Irving Picard, filed a lawsuit against HSBC and several feeder funds for $9 billion in December. Picard charged that the bank and funds should have spotted Madoff’s fraud.

Irving claimed that HSBC asked accountancy firm KPMG twice to investigate the bank’s suspicion that Madoff’s investment company was involved in fraud, but the bank had a strong financial incentive to take part in the scheme by being silent about it.

HSBC previously said that KPMG did not conclude in its two reports that fraud was being committed by Madoff’s firm. The bank claimed lack of knowledge about the Ponzi scheme and cited a $1 billion loss as proof that it , too, was a victim of Madoff. HSBC previously asked a New York district court judge to dismiss Picard’s lawsuit.

Madoff, who is serving a 150-year sentence in a North Carolina federal prison, confirmed that HSBC went over his company’s books twice, but missed things.

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New York, NY, United States (AHN) – Stihl Inc. is voluntarily recalling 2.3 million gas-powered lawn tools because of the risk of fuel spills catching fire and causing burns, the U.S. Consumer Product Safety Commission announced Wednesday.

Affected products are gas powered Stihl trimmers, brushcutters, KombiMotors, hedge trimmers, edgers, clearing saws, pole pruners, and backpack blowers that utilize a toolless fuel cap.

CPSC officials said consumers should stop using the recalled yard power tools immediately and return them to an authorized Stihl dealer for a refund.

“The level of ethanol and other fuel additives can distort the toolless fuel cap, allowing fuel to spill, posing a fire and burn hazard,” CPSC said in a statement.

Virginia Beach, VA-based STIHL says no injuries have been reported among the 81 reports of difficulty with either installing or removing the fuel caps and reports of fuel spillage.

The recalled tools were sold nationwide from July 2002 through May 2011 for between $190 and $650.

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Grafenwörth, Australia (AHN) – A driver who swerved to avoid hitting a rabbit splashed into a swimming pool instead.

Martina, Boller, 42, hit her brakes suddenly when she realized the bunny in her path wasn’t going to move. As she braked her car veered and she crashed through a garden hedge before landing in a pool.

The incident occurred in Lower Austria’s Tulln district on Wednesday.

“She managed to land exactly in the pool which would have been quite a stunt if she’d meant to do it,” said one firefighter in published reports.

“Apart from being very wet and very embarrassed the driver was not hurt,” they added.

A crane had to be brought in to lift the water flooded car out of the pool. The pool had to be pumped out in order to salvage her wrecked vehicle.

The rabbit and the woman escaped any serious injury. The rabbit seemingly fine and the woman released from a nearby hospital after being evaluated.

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New York, NY, United States (AHN) – Billionaire Raj Rajaratnam has been found guilty on all 14 criminal counts in a massive insider trading scandal that rocked one of Wall Street’s largest hedge fund management firms. Rajaratnam, a Sri Lankan-American who worked at Needham & Company before founding the Galleon Group in 1997, became the subject of the largest hedge fund insider trading fraud in American history when he was arrested in 2009.

According to U.S. Justice Department prosecutors and Securities and Exchange Commission (SEC) analysts, Rajaratnam built a network of illegal informants, giving him the inside scoop on major companies and allowing him to illicitly take profits and mitigate losses based on confidential information.

The information came from household names including Google, Intel, eBay and Hilton. It also involved Wall Street movers such as Clearwire, Akamai Technologies and ATI.

Prosecutors say his information ring helped him take home more than $20 million in the three years leading up to his arrest. During the trial, several employees at Galleon aided prosecutors; 11 people have already pleaded guilty to their involvement in fraud while others await trial.

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United States (ProPublica) – by Minhee Cho

ProPublica had the immense honor of winning the Pulitzer Prize for National Reporting for its series, “The Wall Street Money Machine.” The lead reporters, Jake Bernstein and Jesse Eisinger, take a moment to explain the series, how it all started and their reaction after reeling in ProPublica’s second Pulitzer, which was also the first ever awarded to a body of work that didn’t appear in print.

Read their series: The Wall Street Money Machine and the letter addressing the award from our editor-in-chief. You can also subscribe to all of ProPublica’s podcasts on iTunes.

TRANSCRIPT

Mike Webb: Hi, I’m Mike Webb, and welcome to the ProPublica Podcast. Each year, the Pulitzer Prize is awarded for outstanding achievement in the fields of literature, musical composition, and journalism. On Monday, April 18th, the Pulitzers announced this year’s winners, and ProPublica was once again honored to be among them. Jesse Eisinger and Jake Bernstein won the award in the category of National Reporting for their outstanding Wall Street Money Machine series, which examined how some Wall Street bankers and hedge funds sought to enrich themselves at the expense of their clients and sometimes even their own firms through sketchy transactions that delayed and ultimately worsened the financial crisis.

On today’s podcast, we brought the two reporters in to discuss their stories, its impact, and what it’s like to win a Pulitzer Prize.

Congratulations and welcome, guys.

Jake Bernstein: Thanks. Jesse Eisinger: Thanks for having us.

Mike: All right, so listen, why don’t we recap the original three stories that you did. Jesse, why don’t you tell us how the Magnetar Trade story came together?

Jesse: Sure. So we were approached by the guys from Planet Money, Adam Davidson and Alex Blumberg, in the summer of 2009. And they said. “We’ve done this great piece of radio journalism for This American Life called ‘The Giant Pool of Money,’ but we want a follow‑on piece. We want to know what happened afterwards.” And there had been an enormous amount of journalistic attention shed on the events of September 2008, when the global financial system collapsed, or was on the verge of collapsing. But there had been very little attention paid to the run‑up in late 2006 and early 2007. And we thought that was a great place to start looking for stories. And so we set out.

Jake: Alex and Adam had sort of done this soup‑to‑nuts version of the financial crisis, where they had looked at everything from housing to structured finance, and they had sort of seen the craziness of the boom. But they had felt, while they were doing their reporting, that there was another side of the story that they weren’t getting, which was that people knew that there was problems, knew that there were serious asymmetries that there were issues going on, bankers, people on Wall Street, and that they took advantage of that. And that in taking advantage of it, they may have made the crisis worse.

But they didn’t know exactly where that had happened and who was responsible, and so they sort of tasked us with trying to find that out.

Jesse: Yeah. This sort of basic, essential sort of journalistic question, “What did they know and when did they know it?”

Mike: And what was it that you found?

Jesse: We started looking at this world of CDOs, these bundles of mortgage securities called “collateralized debt obligations.” That was the nexus of the financial crisis. That seemed like a very natural place to look. And what we found was initially a lot of people in the CDO world telling us about a hedge fund out of Chicago that very few people had heard of called Magnetar.

Mike: Why Magnetar? Were they really that big of a player? They were the ones?

Jake: They were pretty big. But it was, we would talk to people, CDO managers and bankers and all kinds of people, and we’d just keep on hearing the same thing. “You really need to look at these guys.” These guys were responsible for a lot of deals, and they sort of epitomized this sense in ’06 and ’07 of folks who were really just sort of inflating the bubble bigger and bigger and bigger, even though they knew it probably wasn’t sustainable.

And what we found out after doing our reporting was that Magnetar was responsible for more than $40 billion worth of CDOs, which is a pretty big figure any way you slice it.

Jesse: Yeah, it was a huge figure. And they were by far the dominant player in going to Wall Street and asking Wall Street to make deals for them. And they would invest in the deal to make it happen, but really what they were doing was betting against the deal in a much greater proportion than they were actually investing in it. And so they had much more to gain from the collapse of the deals than their investment in the deals.

Mike: OK, and then the second story about how the banks allowed this to happen, or how the banks played a role in this.

Jake: Well, for our second story what we really wanted was to quantify this in some way. And so we managed to do some work with this wonderful data firm called Thetica, and they really crunched the numbers for us and allowed us to see sort of what was going in the CDO business. Because we increasingly were hearing that there weren’t that many investors in ’06 and ’07, that people were actually ‑ investors, real investors, real money investors ‑ were leaving the market. Because they kind of saw what was happening. And for other reasons as well.

But the volume of deals kept on growing, and really skyrocketing. So we wanted to know: who’s buying this stuff? So through our analysis of the data we began to see that, in fact, the biggest buyer for one key part of the CDO was just other CDOs.

And it was this huge sort of self‑dealing daisy chain, if you will. So that’s really what the second story was about.

Jesse: Right. And what was happening with those purchases was they were essentially being orchestrated by the banks themselves. The banks actually controlled, dictated, the purchase of parts of CDOs by other CDOs. And the banks were using that to veil, mask their own purchases of the CDOs. So essentially what they were doing was buying their own garbage, which had a wonderful effect of increasing the bonus pools for the bankers themselves that were creating these deals, but eventually led to the destruction of Merrill‑Lynch, the near‑failure of Merrill‑Lynch, the collapse of CitiGroup, UBS.

Eventually the Wall Street collapse, mainly because of CDOs, especially because they were regurgitating this kind of stuff and eating themselves.

Jake: And of course at the end of the day it was taxpayers who were on the hook for this.

Mike: Right. Now what was the broad scope of the third story.

Jake: The third story is we sort of dove deep into Merrill‑Lynch, which was the biggest producer of CDOs during this period, and really tried to figure out something that was kind of a question mark that we had. Merrill‑Lynch kind of did itself in by taking so much of their own product. They were eating their own cooking. And yet why would a bank, which is really concerned about profit and traders who are concerned about making profit because they want bonuses off of that profit, why would they take stuff that was losing money, that no one else wanted?

And so we dug deep into that and we found something that internally in Merrill was called the “subsidy.” And the way the subsidy worked was that the CDO group was not allowed within the bank to keep the stuff they couldn’t sell; they had to get rid of it.

And so what they were doing was they were essentially selling it to another division within the bank, another group of traders who were marking it at close to book value, at close to par. And then the CDO group was sharing its bonuses with that group as an incentive for them to take it.

Which was called the “subsidy,” and which explained how a bank like this could do this kind of thing.

Mike: OK, and last week the Senate issued a report that sort of talked about ‑ that I know mentioned some of your work ‑ and talked about some of the necessary reforms.

Jesse: Yeah. The Levin committee ‑‑ what is it called? It’s the…

Jake: The Permanent Sub‑Committee on Investigations.

Jesse: Yeah, the Permanent Sub‑Committee on Investigations, a well‑known bipartisan committee, came out with an enormous report on the CDO business. Largely on the CDO business, on the sort of financial collapse. And they cited ProPublica’s work numerous times.

Mike: Your work.

Jesse: Our work, which was very flattering. And I think that the central premise of our work, that CDOs were buying CDOs and propagating this machine, keeping this machine going to the benefit of individual bankers. That was a running theme in the report. And then the other running theme was that bankers knew the business was slowing down and took advantage of it. Goldman‑Sachs was the main focus of their report, Goldman and Deutsche Bank. So they’ve got an enormous amount of detail on that. We had focused on other banks: Merrill, Citi, primarily, and the Magnetar trade. But they were thematically very similar.

Jake: The Levin committee found this thread of a lack of transparency and just incredible greed and self‑interest on the part of Wall Street. And that was the same thing that we had found, so they sort of cited our work, particularly about Magnetar, to sort of demonstrate what was going on and what they were seeing with a bunch of other banks and players.

Jesse: And the essence was that there was a conflict of interest, where the banks were serving their interests or the interests of one customer, and not disclosing the genesis of these deals to other customers. So they weren’t saying, “We’re betting against this.” Or, “The hedge fund that helped create this is betting against it, it’s not betting for it.”

Mike: Right. And that was a key point in your story.

Jesse: In the Magnetar story, yeah.

Mike: Right. What other reforms came about because of your work? Or what other impact have you seen it have?

Jake: The jury’s still out, because they’re kind of writing the rules. But the Magnetar story was cited on the Senate floor by Senator Chris Dodd during the debate over what eventually became the Dodd‑Frank financial reform. So that’s sort of still in the process. The SEC has been doing some work around the stuff that we’ve written about. They’ve issued Wells Notices to some of the people who are involved in the Magnetar deals. A Wells Notice is a notice that you’re under investigation and that they might be bringing charges against you.

One of the deals that we focused on was a JP Morgan deal called Squared, and that’s the deal that they’ve looked at. They’ve also looked at some other deals that are under investigation that we wrote about first. That’s one sort of movement.

But there really hasn’t been as many prosecutions and as many consequences for what was the largest financial collapse since the Great Depression. And it surprised a lot of people.

Mike: And you wrote about that in a recent column.

Jesse: Yeah. I think that everybody from the outside is utterly shocked that there haven’t been more people charged, going to jail. From the mortgage originators like Countrywide or New Century to Washington Mutual to the investment banks, Bear Sterns, Lehman. I think that you could make very good cases that some of these banks mislead their shareholders at the least; that were misleading in testimony to the Senate. And that they lied about their books.

Mike: So your work will play a role in some of the lawsuits that end up being filed.

Jesse: I think that, yeah, we’ve already been cited in civil lawsuits. So I think that that’s one place where this is going to play out. And as Jake said, the other place this is going to play out is the SEC. But I think that to a large extent the perpetrators of the worst financial crisis since the Great Depression are going scott‑free.

Mike: I want to find out how you guys responded to winning the actual award. How did you hear about it first and what was your reaction?

Jesse: We won something?

Jake: It was quite special. We all gathered around the computer here in the office, the entire staff, waiting for the three o’clock hour to strike and the committee to put up who were the winners. And then we saw our names and knew that in fact it was real. And it’s obviously one of the great honors and pleasures that a journalist can have in their career, so it’s pretty terrific.

Jesse: And I think that we can say with straight faces that we we’re not in it for prizes, but when you win one, it’s quite wonderful.

Mike: People have pointed out that business journalism doesn’t generally do well with the Pulitzers.

Jake: We were very surprised that we would get an award like this, simply because our story’s very difficult. It’s a very complicated story. It really requires some work on the part of the reader, because they have to go with us and really try to understand these things. And it was a hard story to put together. So it’s just very gratifying. And the other thing is, it appears that our series is the first series that was published online before it was in newspapers that’s won a Pulitzer. I think we’ll see a lot more of those in the years to come, but to be the first one is pretty cool.

Jesse: And we were cited especially for bringing this to a level for the lay reader. And I think we took a lot of pride in that. Our editors really worked with us. They worked and worked and worked with us, Steve Engelberg and Eric Umansky, to make our points comprehensible, jargon‑free, accessible to the average reader. And the This American Life guys helped us structure the narrative in a way that was accessible to people and drew them in and drew them along in the story. And so we’re grateful for that. And I think that was one of the great accomplishments of this story, this kind of collaboration and partnership that allowed the storytelling to really come through.

Jake: Yeah, certainly. That was our biggest challenge, is we really wanted this to be something that a general audience could appreciate. And we put a tremendous amount of work in it and we’re very pleased.

Mike: All right, guys. Congratulations. We’re really thrilled for both of you.

Jesse: Thank you.

Jake: Thank you.

Mike: That was Jake Bernstein and Jesse Eisinger. You can see all of the elements in their series at ProPublica.org/wallstreet. And now for our Officials Say the Darndest Things Tumblr Quote of the Week. “I always thought I was gonna have like really cool phones and stuff. We can’t get our phones to work. C’mon guys, I’m the President of the United States! Where’s the fancy buttons and stuff and the big screen that comes up? It doesn’t happen.”

Who said it? Well, I’m going to go out on a limb and guess that 100 percent of our listeners identified the remark as coming from President Barack Obama, as he was overheard speaking to campaign donors about White House technology and other issues.

OK, that does it for this week’s show. Thanks to Minhee Cho for producing this podcast and to our former producer Brent Gardner-Smith, for his valuable input this week as well. For ProPublica, I’m Mike Webb. We’ll see you next time.

Transcription by CastingWords

– Provided by ProPublica.org

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Washington, DC, United States (KaiserHealth) – Like many other interest groups, the medical device industry met with White House officials in the run-up to the health care battle in Congress. But while insurers, pharmaceutical firms and even the American Medical Association made agreements trading their support for specific concessions, the device makers were not able to close a similar deal.

As a result, the final health care reform bill included a 2.3 percent excise tax on device makers that’s expected to produce $20 billion over a decade to help pay for expanded health coverage.

That’s the law, or so it would seem.

But in Washington, it’s never over until it’s over. And like other medical interests who are scrambling to influence the implementation of health care reform, medical device makers are showering cash on friends in Congress and working the halls, hoping that one of five bills that would overturn the excise tax might actually make it into law.

Veteran Hill watchers say that may be a long shot, so to hedge its bets, the industry is also lobbying the Internal Revenue Service to write rules exempting hundreds of devices from the excise tax — even though the health law says the exemption should be limited to items widely purchased by the public from retailers. The outcome of that under-the-radar battle is far from certain.

The medical device business and its lobbyists have a strong record of winning concessions and at least partially deflecting the costs of health insurance coverage expansion. An early Senate “framework” version of the health bill pushed by Democrat Max Baucus of Montana, for example, would have nailed the industry with a $40 billion excise tax bill over ten years beginning in 2010. Shocked at the price tag, the device manufacturers’ trade group, the Advanced Medical Technology Association (AdvaMed), pushed back, aided by industry giants Medtronic Inc., Johnson & Johnson, 3M Co., and others.

With the help of a bipartisan group of lawmakers, the device makers succeeded in cutting the tax in half in the final health care law, which also delayed the start date for the tax until 2013, three years later than in the Baucus proposal.

Manufacturers, however, maintain that even the smaller tax in the health care law is catastrophic for them. So the industry is targeting Capitol Hill anew and working the regulatory process, searching for concessions.

Five industry-supported bills currently before Congress would completely overturn the excise tax on medical devices, the most widely supported of which are bills introduced by Sen. Orrin Hatch, R-Utah, and Rep. Erik Paulsen, R-Minn. Hatch’s bill has- Republican co-sponsors. Paulsen’s House bill has 119 co-sponsors, including three Democrats.

Hatch, who has been one of the health care law’s fiercest opponents, says the tax on medical devices will increase insurance premiums and the cost of care. Relying on an excise tax “to fund Obamacare will cripple an important engine of opportunity, job growth and innovation,” Hatch said in a January news release.

CAMPAIGN CONTRIBUTIONS FROM INDUSTRY

In 2009 and 2010, both Hatch and Paulsen were major beneficiaries of medical device industry money.

Hatch was not up for re-election that cycle but received more than $90,000 in campaign donations from the medical supply industry, which made him the trade group’s third largest political beneficiary, according to the Center for Responsive Politics. The political action committee of the AdvaMed association alone contributed $10,584 to Hatch’s campaign, and $3,150 to Paulsen’s.

The political action committees of individual companies also chipped in. The PAC of Boston Scientific, a major manufacturer of heart and other medical devices, contributed $7,000 to Paulsen’s campaign and $5,000 to Hatch’s. Medtronic, the world’s largest medical device maker — which is based in Paulsen’s home state — donated $3,000 to Paulsen and $5,000 to Hatch.

Paulsen spokesman Tom Erickson said the bill is a response to job loss fears, not industry campaign donations, and that more than 400 medical device companies are based in Minnesota. A Hatch spokesman said the senator’s bill reflects his political philosophy: “It’s something he has felt strongly about for a long time, that taxes are counterproductive,” spokesman Mark Eddington said.

Hatch and Paulsen are only two of the friends the device industry is counting on for help.

In late March, Democrat Amy Klobuchar of Minnesota and Republican Scott Brown of Massachusetts launched a new Senate medical technology caucus to increase awareness about issues facing the industry. Both represent states with significant medical device manufacturers and have been major beneficiaries of industry money.

Boston Scientific, which in 2010 had $7.8 billion in sales, is based in Brown’s state. In 2010, Brown received more than $30,000 in campaign donations from the medical supply industry, which is dominated by the device makers. Klobuchar received more than $40,000 in contributions.

“These businesses not only spark medical breakthroughs, they save lives,” Klobuchar said in comments released on the day the new caucus was launched. “Every day in every state small medical technology companies are driving the innovation agenda we need to compete in a global economy. I will continue to work to make sure that Minnesota remains a leader in health care innovation by developing innovative products while maintaining patient safety.”

The House medical technology caucus was revamped in February. According to the industry newsletter MedCity, its new website was launched on the same day that Paulsen, who chairs the group together with Anna Eschoo, D-Calif., addressed the Minnesota life sciences trade group LifeScience Alley.

In the halls of Congress, the medical device manufacturers have long pushed the jobs refrain, first to deflect taxes, and second to fend off scrutiny from the U.S. Food and Drug Administration, which regulates devices. Dr. Josh Makower, the founder of Exploramed, a medical device incubator – who frequently testifies before Congress – said the excise tax will particularly hurt small firms, many of which rely solely on investment capital for years before turning a profit.

“The saddest thing is that these small companies are exactly the ones that are delivering new innovations,” Makower told iWatch News in an e-mail response to questions.

REVOLVING DOOR

In pushing its interests, the device industry benefits from the revolving door connecting K Street with Capitol Hill.

In December, former AdvaMed executive Brett Loper, who lobbied against the excise tax, was named House Speaker John Boehner’s chief policy officer. Elizabeth Kegler, the association’s vice president of government affairs, is a former health policy advisor to Sen. Chuck Grassley, R-Iowa.

Advamed spent almost $1.5 million lobbying Congress on behalf of its members in 2010. First quarter lobby disclosure records for 2011 will not be available until late April, but medical device industry activity suggests the industry has likely not slowed its spending.

Despite device industry campaign donations, powerful allies, and support for the Paulsen bill in the House, George Schutzer, a tax lobbyist and attorney at the Washington firm Patton Boggs, said he doubts Congress is ready to overturn the device tax. A win for the medical device industry would “open the flood gates” for challenges to the health reform bill by other parts of the medical industry, Schutzer said, and would most likely result in an Obama veto.

As a result, the medical device industry has taken the fight beyond Congress to the Internal Revenue Service, which will administer the tax.

That part of the struggle appears to be splitting the industry as manufacturers try to protect their market niches. Although the medical device category includes big-ticket items generally sold to hospitals, including artificial hearts, pacemakers, coronary stents and artificial joints, it also includes a wide range of less expensive items ranging from tongue depressors to examination gloves.

The health law exempts from the excise tax eyeglasses, contact lenses, and any device the Treasury Department determines is generally purchased by the general public at retail for individual use. Certain sectors of the device industry, however, contend that devices from wheelchairs and scooters to home oxygen systems fit the exemption criteria.

In written comments to the IRS, which is expected to publish tax guidance for device manufacturers, DJO Global, the largest U.S. supplier of orthopedic devices, asked for an exemption on all items classified by Medicare as durable medical equipment, prosthetics and orthotics, including bone-growth stimulators and electrotherapy devices. The American Association for Home Care, which represents the home medical care industry, wrote that it believes all durable medical equipment, including complex power wheel chairs, should be exempt.

“Durable medical equipment and home medical equipment fit that exemption language to a tee,” said Jay Witter, senior director of government affairs at the American Association for Home Care, in an interview. Witter quoted a 2009 fact sheet released by former Speaker Nancy Pelosi that said wheelchairs would be exempt, and that the excise tax would apply only to sales of medical devices to hospitals and other institutions. The comment period on the exemption ended in late March; the IRS did not respond to questions on when it might decide who gets the exemption and who doesn’t.

Witter said it is unclear whether wheelchairs and other durable medical equipment were included in revenue calculations that projected $20 billion in revenue from the tax over a decade’s time. But since the majority of home health customers are covered by Medicare, which pays set rates, Witter said the cost of the excise tax cannot be passed on to consumers.

Diana Zuckerman, president of the National Research Center for Women & Families, a think tank that focuses on health issues, said the idea that all durable medical equipment should be exempt from the excise tax is absurd and could impair funding for the health care law.

“If they get what they want, the whole health care bill collapses,” said Zuckerman. “There is too much money involved to get rid of the excise tax or to substantially lower it.”

TAX DEDUCTION WINDFALL?

As device manufactures plead for exemptions, hospitals and group purchasing organizations worry that those who remain on the hook for the tax may simply pass it on in higher prices to hospitals and other purchasers. Curtis Rooney, president of the Health Industry Group Purchasing Association, said the excise tax could even wind up being a windfall for medical device manufacturers.

In a letter to the IRS, Rooney’s organization, along with the American Hospital Association, the Federation of American Hospitals and the Catholic Health Association of the United States, wrote that device manufacturers should be prohibited from passing on the excise tax to consumers, especially if they are allowed to deduct the excise tax when calculating their federal income tax.

Allowing device manufacturers to write off the tax and pass along the cost, the letter says, would “permit a financial ‘double-dip’ that could leave device companies in a better financial position than before the [health law] was enacted.”

Asked if device manufacturers planned to increase the prices charged to hospitals and other consumers to make up for excise tax, an AdvaMed spokeswoman declined to answer. She instead referred to a comment by David Nexon, the association’s senior executive vice president: “Each AdvaMed member company will have to individually decide how to best deal with the damaging effects of the tax. For some, that might mean cutting R&D, reducing staff or other measures. Those are tough business decisions that will have to be made if this tax goes forward and go to the heart of why we opposed the tax in the first place.”

iWatch News is the investigative news report of the Center for Public Integrity, a nonprofit group focused on investigative journalism.

– Provided by Kaiser Health News.

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United States (ProPublica) – by Marian Wang

The Securities and Exchange Commission may soon file suit over a mortgage securities deal involving JPMorgan Chase and a hedge fund called Magnetar, Bloomberg reported. Two individuals have been notified of potential charges. They include a former executive at JPMorgan, the bank that created and marketed the security, and a former executive at GSC Capital, the firm that managed the selection of assets.

As we reported last fall, regulators have been investigating whether JPMorgan misled investors about the role that Magnetar, a hedge fund, played in selecting the assets that went into a $1.1 billion collateralized debt obligation created by the bank in 2007. The deal, known as “Squared,” was made up of slices of other CDOs backed by subprime mortgages. (See the prospectus for the deal.)

Squared was one of more than two dozen CDO deals that Magnetar did in the waning days of the housing boom, ultimately helping to create at least $40 billion of CDOs. (It was also one of several deals managed by GSC that also involved Magnetar.) As we detailed last year, Magnetar often pushed for riskier assets to be included in CDOs as part of a strategy to bet against the housing market. Magnetar has consistently denied that strategy and has told us that it would have made money regardless of the direction of the housing market.

Magnetar earned about $290 million off its bet on Squared. The firm does not appear to be a target of the SEC’s investigation and declined to comment to Bloomberg. It previously told us it “did not choose the assets in any CDO,” though emails recently published by the Financial Crisis Inquiry Commission suggest otherwise.

The former JPMorgan executive at the center of the investigation, Michael Llodra, was global head of the bank’s CDO business. Bloomberg reported that Llodra disclosed in his broker registration filings that he received a notice of potential legal action, or Wells notice, from the SEC in January. Llodra’s attorney, Sean Hecker, declined our request for comment.

JPMorgan earned about $20 million for creating the deal, we were told, but the bank ultimately lost about $880 million when the safest slices of the CDO—which the bank kept on its books—lost value. Investors in Squared also suffered significant losses.

The SEC also sent a Wells notice to Edward Steffelin, a former executive at GSC Group, the firm that helped manage the “Squared” deal. Steffelin also declined our request for comment. CDO managers, like GSC, are supposed to select assets for the CDO with the interests of investors in mind.

Spokesmen for JPMorgan, GSC Capital and the SEC declined to comment to Bloomberg.

– Provided by ProPublica.org

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Washington, DC, United States (AHN) – Global economic and political instability has made paper money less attractive to investors who are now driving up prices for commodities such as oil, precious metals and crops.

Sovereign debt risk in Europe and the U.S., coupled with Japan’s post-earthquake and ongoing nuclear crisis on top of political instability in the Middle East, is behind investor decisions to put their money into commodities.

That much liquidity in commodity markets is pushing commodity prices to high levels.

Wednesday morning trading in London saw gold reach a new record nominal high of $1,460.92 per ounce while silver hit a 31-year nominal high of $39.63 per ounce.

Oil settled at $108.34 per barrel, which pushed U.S. gasoline prices up to an average $3.685.

Cotton prices are around $2 per pound, which has many U.S. farmers scrambling to plant cotton this year instead of food crops such as corn, soybeans or peanuts.

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JOHANNESBURG, South Africa (IRIN) – A new study has put the brakes on a rush by some countries and companies to establish plantations of jatropha, an oil-bearing shrub and cousin of the castor bean bush, as a source of biofuel.

The study by ActionAid, an anti-poverty NGO, the Royal Society for the Protection of Birds, and Nature Kenya, a conservation society, looked at whether biofuel made from jatropha grown in the Dakatcha woodlands in Kenya’s coastal district of Malindi, could indeed be a green fuel.

Chris Coxon of ActionAid said the oil yield of the seed from plants grown on land earmarked for jatropha cultivation in Malindi would determine whether the shrub provided a viable alternative to fossil fuel.

Previous land use was another critical factor. The study found that throughout the production and consumption process in the Dakatcha woodlands, the jatropha would emit between 2.5 and six times more greenhouse gases than fossil fuels, largely because of clearing the forest, which stores massive amounts of carbon in its vegetation and soil, to make room for the plant.

Other studies have also found that the yield from jatropha can vary considerably, because contrary to the popular perception that it can thrive in semi-arid conditions, the plants need water and nutrients to produce high yields.

So, if an investment in irrigation and fertilizer is required, why not grow food crops instead, the study argued. Much of the biofuel from the Dakatcha woodlands project, when it starts producing, is destined for Europe to meet regional targets for switching to renewable energy.

The study underlined what a joint UN Food and Agriculture Organization (FAO) and International Fund for Agricultural Development (IFAD) report on jatropha had found in 2010 – that the shrub was useful as a bio-energy crop for cultivation by small-scale farmers.

ActionAid spokeswoman Natalie Curtis said jatropha could be grown between crops or as a hedge to divide fields, and the oil used as fuel for stoves, irrigation pumps and generators.

But even then, growing jatropha could prove uneconomical if there was no investment in developing higher oil-yielding, non-toxic varieties.

The Kenyan government has suspended clearing the full 50,000 hectares of forest, which would have displaced 20,000 people for the proposed plantation in Dakatcha, pending an environmental impact assessment, the study said.

“What concerns us is the growing move towards massive plantations of jatropha in developing countries,” said Coxon.

Here is a closer look at jatropha and why it has caught the imagination of so many.

How many?

In 2008, jatropha was planted on an estimated 900,000 hectares globally; 760,000 hectares (85 percent of the total) were located in Asia, followed by Africa with 120,000 hectares and Latin America with 20,000 hectares. By 2015, jatropha would be planted on a projected 12.8 million hectares, according to an FAO report.

By comparison, maize, one of the world’s major staple grain crops, is planted on more than 160 million hectares.

In another four years, Indonesia will be the largest jatropha producing country in Asia. In Africa, Ghana and Madagascar will be the biggest producers, while Brazil will be the main producer in Latin America.

Why jatropha?

Jatropha has a long history of being recognized as a substitute for fossil fuel. During the Second World War it was used as a replacement for diesel in Madagascar, Benin and Cape Verde, while its glycerine by-product was used to make nitro-glycerine, used in explosives and medicines for treating heart conditions.

FAO said jatropha had gained some ground as a source of oil for producing biodiesel because of the common perception that it could be grown in semi-arid regions with low nutrient requirements and little care.

Jatropha’s extensive roots allow it to reach water deeper in the soil and extract leached mineral nutrients unavailable to many other plants. The surface roots also help bind the soil and can reduce erosion. Compared to other biofuel crops such as sugarcane, it requires less water.

It is a non-edible crop, “So the biodiesel sector does not compete with food and feed use of this crop,” said Simla Tokgoz, a researcher at the International Food Policy Research Institute (IFPRI), a US-based think-tank. Other feedstocks used in biodiesel production are rapeseed, soybean, coconut, and palm.

Jatropha is still in the early stages of development as a biofuel but is expected to be a less expensive source for biodiesel production, which could increase profitability, Tokgoz said.

Jatropha oil can be used directly in some diesel engines without being converted into biodiesel, but because it has a higher viscosity than mineral diesel, it works better in tropical environments, where temperatures are higher.

Is it a viable alternative?

Large-scale biodiesel production will need more water, and in water-stressed conditions this could lead to conflict. The FAO/IFAD report said jatropha biodiesel conformed to the required European and USA quality standards, but cautioned that “It is not a technology suited to resource-poor communities in developing countries.”

Biodiesel production also requires expertise, equipment, and the ability to handle large quantities of dangerous chemicals such as toxic methanol and highly corrosive sodium hydroxide.

When comparisons are made of the return on labour input Jatropha performs poorly against other biofuel feedstocks, but much depends on the level of yields, which need to be improved, the FAO/IFAD report said.

Jatropha has a marketable non-edible by-product, but it is less valuable than canola, for example, which can be consumed by animals, said Tokgoz.

Instead of competing for agricultural land, or removing forests or displacing communities, Tokgoz suggested planting government wasteland or contract farming using small- and medium-scale farmers. But again, this would mean investment in irrigation, inputs and efforts to improve yields.

Jatropha is regarded by many as an invasive plant and has been declared a noxious weed in parts of Australia, FAO pointed out. South Africa has banned its commercial production.

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