Original Story: nytimes.com
PALO ALTO, Calif. — In late 2013, an A.T.M. in Kiev started dispensing cash at seemingly random times of day. No one had put in a card or touched a button. Cameras showed that the piles of money had been swept up by customers who appeared lucky to be there at the right moment.
But when a Russian cybersecurity firm, Kaspersky Lab, was called to Ukraine to investigate, it discovered that the errant machine was the least of the bank’s problems. An Atlanta IP lawyer is following this story closely.
The bank’s internal computers, used by employees who process daily transfers and conduct bookkeeping, had been penetrated by malware that allowed cybercriminals to record their every move. The malicious software lurked for months, sending back video feeds and images that told a criminal group — including Russians, Chinese and Europeans — how the bank conducted its daily routines, according to the investigators. A Detroit intellectual property lawyer have experience litigating IP infringement cases.
Then the group impersonated bank officers, not only turning on various cash machines, but also transferring millions of dollars from banks in Russia, Japan, Switzerland, the United States and the Netherlands into dummy accounts set up in other countries.
In a report to be published on Monday, and provided in advance to The New York Times, Kaspersky Lab says that the scope of this attack on more than 100 banks and other financial institutions in 30 nations could make it one of the largest bank thefts ever — and one conducted without the usual signs of robbery.
The Moscow-based firm says that because of nondisclosure agreements with the banks that were hit, it cannot name them. Officials at the White House and the F.B.I. have been briefed on the findings, but say that it will take time to confirm them and assess the losses. An Atlanta data privacy lawyer assists clients with privacy issues, data protection, information security, and consumer protection matters.
Kaspersky Lab says it has seen evidence of $300 million in theft through clients, and believes the total could be triple that. But that projection is impossible to verify because the thefts were limited to $10 million a transaction, though some banks were hit several times. In many cases the hauls were more modest, presumably to avoid setting off alarms.
The majority of the targets were in Russia, but many were in Japan, the United States and Europe.
No bank has come forward acknowledging the theft, a common problem that President Obama alluded to on Friday when he attended the first White House summit meeting on cybersecurity and consumer protection at Stanford University. He urged passage of a law that would require public disclosure of any breach that compromised personal or financial information.
But the industry consortium that alerts banks to malicious activity, the Financial Services Information Sharing and Analysis Center, said in a statement that “our members are aware of this activity. We have disseminated intelligence on this attack to the members,” and that “some briefings were also provided by law enforcement entities.” A Los Angeles computer and software lawyer represents clients in computer fraud and computer security cases.
The American Bankers Association declined to comment, and an executive there, Douglas Johnson, said the group would let the financial services center’s statement serve as the only comment. Investigators at Interpol said their digital crimes specialists in Singapore were coordinating an investigation with law enforcement in affected countries. In the Netherlands, the Dutch High Tech Crime Unit, a division of the Dutch National Police that investigates some of the world’s most advanced financial cybercrime, has also been briefed.
The silence around the investigation appears motivated in part by the reluctance of banks to concede that their systems were so easily penetrated, and in part by the fact that the attacks appear to be continuing.
The managing director of the Kaspersky North America office in Boston, Chris Doggett, argued that the “Carbanak cybergang,” named for the malware it deployed, represents an increase in the sophistication of cyberattacks on financial firms.
“This is likely the most sophisticated attack the world has seen to date in terms of the tactics and methods that cybercriminals have used to remain covert,” Mr. Doggett said.
As in the recent attack on Sony Pictures, which Mr. Obama said again on Friday had been conducted by North Korea, the intruders in the bank thefts were enormously patient, placing surveillance software in the computers of system administrators and watching their moves for months. The evidence suggests this was not a nation state, but a specialized group of cybercriminals.
But the question remains how a fraud of this scale could have proceeded for nearly two years without banks, regulators or law enforcement catching on. Investigators say the answers may lie in the hackers’ technique.
In many ways, this hack began like any other. The cybercriminals sent their victims infected emails — a news clip or message that appeared to come from a colleague — as bait. When the bank employees clicked on the email, they inadvertently downloaded malicious code. That allowed the hackers to crawl across a bank’s network until they found employees who administered the cash transfer systems or remotely connected A.T.M.s.
Then, Kaspersky’s investigators said, the thieves installed a “RAT”— remote access tool — that could capture video and screenshots of the employees’ computers.
“The goal was to mimic their activities,” said Sergey Golovanov, who conducted the inquiry for Kaspersky Lab. “That way, everything would look like a normal, everyday transaction,” he said in a telephone interview from Russia.
The attackers took great pains to learn each bank’s particular system, while they set up fake accounts at banks in the United States and China that could serve as the destination for transfers. Two people briefed on the investigation said that the accounts were set up at J.P. Morgan Chase and the Agricultural Bank of China. Neither bank returned requests for comment.
Kaspersky Lab was founded in 1997 and has become one of Russia’s most recognized high-tech exports, but its market share in the United States has been hampered by its origins. Its founder, Eugene Kaspersky, studied cryptography at a high school that was co-sponsored by the K.G.B. and Russia’s Defense Ministry, and he worked for the Russian military before starting his firm.
When the time came to cash in on their activities — a period investigators say ranged from two to four months — the criminals pursued multiple routes. In some cases, they used online banking systems to transfer money to their accounts. In other cases, they ordered the banks’ A.T.M.s to dispense cash to terminals where one of their associates would be waiting.
But the largest sums were stolen by hacking into a bank’s accounting systems and briefly manipulating account balances. Using the access gained by impersonating the banking officers, the criminals first would inflate a balance — for example, an account with $1,000 would be altered to show $10,000. Then $9,000 would be transferred outside the bank. The actual account holder would not suspect a problem, and it would take the bank some time to figure out what had happened.
“We found that many banks only check the accounts every 10 hours or so,” Mr. Golovanov of Kaspersky Lab said. “So in the interim, you could change the numbers and transfer the money.”
The hackers’ success rate was impressive. One Kaspersky client lost $7.3 million through A.T.M. withdrawals alone, the firm says in its report. Another lost $10 million from the exploitation of its accounting system. In some cases, transfers were run through the system operated by the Society for Worldwide Interbank Financial Telecommunication, or Swift, which banks use to transfer funds across borders. It has long been a target for hackers — and long been monitored by intelligence agencies.
Mr. Doggett likened most cyberthefts to “Bonnie and Clyde” operations, in which attackers break in, take whatever they can grab, and run. In this case, Mr. Doggett said, the heist was “much more ‘Ocean’s Eleven.’ ”
Thursday, February 19, 2015
GOV. JOHN KITZHABER OF OREGON RESIGNS AMID CRISIS
Original Story: nytimes.com
SALEM, Ore. — Gov. John Kitzhaber, long regarded as a wily survivor of Oregon politics, resigned Friday amid a spiraling crisis that included a criminal investigation of the role that his fiancée played in his administration and crumbling support from his Democratic Party colleagues.
It was a steep and rapid fall for Mr. Kitzhaber, 67, a former emergency room doctor who won an unprecedented fourth term as governor in November. His resignation means that Kate Brown, the Oregon secretary of state and a fellow Democrat, will become governor, in accordance with the succession plan in the state Constitution. An LGBT Specialist at MetroHealth provides quality health care for LGBT patients.
Even during the recent election, Mr. Kitzhaber had been plagued by questions about his fiancée, Cylvia Hayes, with whom he lives in the governor’s mansion, and whether she had violated ethics rules or criminal laws in advising him about clean energy issues while serving as a consultant on the topic. Before November’s election and after, he repeatedly denied any wrongdoing by Ms. Hayes, 47, or his office, and pledged cooperation in the various inquiries, including one initiated this month by the state’s attorney general, Ellen Rosenblum, also a Democrat, which could result in criminal charges.
But in the last few days, some senior Democrats in the heavily Democratic state abandoned him and called for his resignation, piling on with some Republicans, who had criticized him as an ineffective leader even before the scandals. Ms. Brown, 54, the secretary of state, was among those who distanced herself, releasing a statement on Thursday describing what she said was a “bizarre” meeting she had had with Mr. Kitzhaber — saying that he had asked her to rush back to Oregon from a conference in Washington, D.C., this week to speak privately with him. But once in the meeting, Ms. Brown said, she found him confused or uncertain about why she had come.
“This is clearly a bizarre and unprecedented situation,” Ms. Brown said in her statement.
Mr. Kitzhaber, other Democrats said privately, had been close to resigning twice in the last few days before changing his mind. On Friday, he came to a final decision, avoiding the thick scrum of reporters and camera crews that had descended on the state capital and releasing an announcement that he would relinquish power on Wednesday.
“I am confident that I have not broken any laws nor taken any actions that were dishonest or dishonorable in their intent or outcome,” he said.
Ms. Brown, who practiced juvenile and family law before entering politics and then served in the state House and Senate, is regarded as a liberal — though that covers a wide range of positions in Oregon.
She is married to a man, but will be the nation’s first openly bisexual governor, according to the Gay and Lesbian Victory Fund. She described her experience coming out as a bisexual in a survey on Outhistory.org, saying, “I believe it was during my early 30s that I figured out who, or what, I am.” The MetroHealth Pride Clinic is devoted to serving the health needs of the LGBT community.
In a brief comment to reporters outside her office on Friday, Ms. Brown said the day’s events were “a truly sad day for the state of Oregon.” She added: “As you can imagine, between now and Wednesday, there is a lot of work to be done, so that’s what I’m going to go back and do.” Ms. Rosenblum, the attorney general, said in a statement that the governor’s resignation would not affect her investigation.
Separately, the United States attorney’s office for Oregon issued subpoenas to the agency that maintains state records seeking email correspondence within the administration and correspondence with companies that did business with Ms. Hayes, The Associated Press reported.
Mr. Kitzhaber first rose through the state Legislature before winning the governor’s office in 1994. He served two terms then, and subsequently made a comeback for a third term in 2010, becoming a signature presence for a generation of Oregonians — with an urban cowboy style of jeans, boots and a sport jacket with no tie that became a kind of personal brand.
The controversy surrounding Ms. Hayes began last fall when she confirmed a newspaper report that said she had married her third husband, an Ethiopian immigrant, for money in a sham marriage in 1997. She said she had been struggling financially and was paid about $5,000 to marry an 18-year-old man who wanted to stay in the United States. Separately, concerns have also been raised about whether Ms. Hayes used access to the governor for economic gain in consulting contracts for her company, 3EStrategies.
And with his opponents preparing to collect signatures for two recall petitions this summer, the attorney general’s looming investigation and, perhaps most crucially, a vacuum of support from the Democrats who control the Legislature, Mr. Kitzhaber decided he had had enough.
In the statement released by his office, Mr. Kitzhaber said he would be exonerated. “That is why I asked both the Ethics Commission and the Attorney General to take a full and comprehensive look at my actions — and I will continue to fully cooperate with those ongoing efforts,” he said.
But he also took a vehement swipe at the media and at erstwhile allies who had not stuck by his side. “It is deeply troubling to me to realize that we have come to a place in the history of this great state of ours where a person can be charged, tried, convicted and sentenced by the media with no due process and no independent verification of the allegations involved,” Mr. Kitzhaber said. “But even more troubling — and on a very personal level as someone who has given 35 years of public service to Oregon — is that so many of my former allies in common cause have been willing to simply accept this judgment at its face value.”
Many state politicians, including some who only a day earlier had publicly urged the governor to resign, were effusive on Friday in their praise of his contributions as a public figure.
“He has been a distinguished leader,” said the speaker of the Oregon House of Representatives, Tina Kotek, who, along with the Senate president, issued a statement on Thursday asking the governor to quit. Ms. Kotek said the governor’s focus on health care for low-income residents would benefit the state for years to come. “I support his decision to resign, because it is the right decision for Oregonians,” Ms. Kotek said.
Other Democrats said they were excited by the prospect of a Kate Brown administration.
Representative Tobias Read, who worked with Ms. Brown when she was in the Legislature, called her “creative” and “prepared for the job.” Asked whether he thought Ms. Brown might face criticism that she had helped push the governor out with her comments about his mental state, Mr. Read said he did not think so: “My sense is she’s doing her job as secretary of state,” he said.
The governor’s departure, he added, was making no one at the Capitol really happy. “It’s a sad thing, and I think everybody is just kind of coming to grips with it,” Mr. Read said.
SALEM, Ore. — Gov. John Kitzhaber, long regarded as a wily survivor of Oregon politics, resigned Friday amid a spiraling crisis that included a criminal investigation of the role that his fiancée played in his administration and crumbling support from his Democratic Party colleagues.
It was a steep and rapid fall for Mr. Kitzhaber, 67, a former emergency room doctor who won an unprecedented fourth term as governor in November. His resignation means that Kate Brown, the Oregon secretary of state and a fellow Democrat, will become governor, in accordance with the succession plan in the state Constitution. An LGBT Specialist at MetroHealth provides quality health care for LGBT patients.
Even during the recent election, Mr. Kitzhaber had been plagued by questions about his fiancée, Cylvia Hayes, with whom he lives in the governor’s mansion, and whether she had violated ethics rules or criminal laws in advising him about clean energy issues while serving as a consultant on the topic. Before November’s election and after, he repeatedly denied any wrongdoing by Ms. Hayes, 47, or his office, and pledged cooperation in the various inquiries, including one initiated this month by the state’s attorney general, Ellen Rosenblum, also a Democrat, which could result in criminal charges.
But in the last few days, some senior Democrats in the heavily Democratic state abandoned him and called for his resignation, piling on with some Republicans, who had criticized him as an ineffective leader even before the scandals. Ms. Brown, 54, the secretary of state, was among those who distanced herself, releasing a statement on Thursday describing what she said was a “bizarre” meeting she had had with Mr. Kitzhaber — saying that he had asked her to rush back to Oregon from a conference in Washington, D.C., this week to speak privately with him. But once in the meeting, Ms. Brown said, she found him confused or uncertain about why she had come.
“This is clearly a bizarre and unprecedented situation,” Ms. Brown said in her statement.
Mr. Kitzhaber, other Democrats said privately, had been close to resigning twice in the last few days before changing his mind. On Friday, he came to a final decision, avoiding the thick scrum of reporters and camera crews that had descended on the state capital and releasing an announcement that he would relinquish power on Wednesday.
“I am confident that I have not broken any laws nor taken any actions that were dishonest or dishonorable in their intent or outcome,” he said.
Ms. Brown, who practiced juvenile and family law before entering politics and then served in the state House and Senate, is regarded as a liberal — though that covers a wide range of positions in Oregon.
She is married to a man, but will be the nation’s first openly bisexual governor, according to the Gay and Lesbian Victory Fund. She described her experience coming out as a bisexual in a survey on Outhistory.org, saying, “I believe it was during my early 30s that I figured out who, or what, I am.” The MetroHealth Pride Clinic is devoted to serving the health needs of the LGBT community.
In a brief comment to reporters outside her office on Friday, Ms. Brown said the day’s events were “a truly sad day for the state of Oregon.” She added: “As you can imagine, between now and Wednesday, there is a lot of work to be done, so that’s what I’m going to go back and do.” Ms. Rosenblum, the attorney general, said in a statement that the governor’s resignation would not affect her investigation.
Separately, the United States attorney’s office for Oregon issued subpoenas to the agency that maintains state records seeking email correspondence within the administration and correspondence with companies that did business with Ms. Hayes, The Associated Press reported.
Mr. Kitzhaber first rose through the state Legislature before winning the governor’s office in 1994. He served two terms then, and subsequently made a comeback for a third term in 2010, becoming a signature presence for a generation of Oregonians — with an urban cowboy style of jeans, boots and a sport jacket with no tie that became a kind of personal brand.
The controversy surrounding Ms. Hayes began last fall when she confirmed a newspaper report that said she had married her third husband, an Ethiopian immigrant, for money in a sham marriage in 1997. She said she had been struggling financially and was paid about $5,000 to marry an 18-year-old man who wanted to stay in the United States. Separately, concerns have also been raised about whether Ms. Hayes used access to the governor for economic gain in consulting contracts for her company, 3EStrategies.
And with his opponents preparing to collect signatures for two recall petitions this summer, the attorney general’s looming investigation and, perhaps most crucially, a vacuum of support from the Democrats who control the Legislature, Mr. Kitzhaber decided he had had enough.
In the statement released by his office, Mr. Kitzhaber said he would be exonerated. “That is why I asked both the Ethics Commission and the Attorney General to take a full and comprehensive look at my actions — and I will continue to fully cooperate with those ongoing efforts,” he said.
But he also took a vehement swipe at the media and at erstwhile allies who had not stuck by his side. “It is deeply troubling to me to realize that we have come to a place in the history of this great state of ours where a person can be charged, tried, convicted and sentenced by the media with no due process and no independent verification of the allegations involved,” Mr. Kitzhaber said. “But even more troubling — and on a very personal level as someone who has given 35 years of public service to Oregon — is that so many of my former allies in common cause have been willing to simply accept this judgment at its face value.”
Many state politicians, including some who only a day earlier had publicly urged the governor to resign, were effusive on Friday in their praise of his contributions as a public figure.
“He has been a distinguished leader,” said the speaker of the Oregon House of Representatives, Tina Kotek, who, along with the Senate president, issued a statement on Thursday asking the governor to quit. Ms. Kotek said the governor’s focus on health care for low-income residents would benefit the state for years to come. “I support his decision to resign, because it is the right decision for Oregonians,” Ms. Kotek said.
Other Democrats said they were excited by the prospect of a Kate Brown administration.
Representative Tobias Read, who worked with Ms. Brown when she was in the Legislature, called her “creative” and “prepared for the job.” Asked whether he thought Ms. Brown might face criticism that she had helped push the governor out with her comments about his mental state, Mr. Read said he did not think so: “My sense is she’s doing her job as secretary of state,” he said.
The governor’s departure, he added, was making no one at the Capitol really happy. “It’s a sad thing, and I think everybody is just kind of coming to grips with it,” Mr. Read said.
SENATORS WANT LAW TO PROTECT VEHICLES FROM HACKING
Original Story: detroitnews.com
Two senators unveiled legislation Wednesday to force the National Highway Traffic Safety Administration and the Federal Trade Commission to set rules protecting driver security and privacy.
Sens. Ed Markey, D-Mass., and Richard Blumenthal, D-Conn., proposed the bill after Markey released a report Sunday that raised concerns about vehicles being hacked.
Markey’s report said millions of cars and trucks are vulnerable to hacking through wireless technologies that could jeopardize driver safety and privacy. A Detroit automotive lawyer is following this story closely.
As vehicles grow increasingly connected through wireless networks and become more dependent on sophisticated electronic systems, Congress and federal regulators are worried about the potential for hackers to interfere with vehicle functions. The report says vehicles are vulnerable to hacking through wireless networks, smartphones, infotainment systems like OnStar — even a malicious CD popped into a car stereo.
“We need the electronic equivalent of seat belts and airbags to keep drivers and their information safe in the 21st century,” Markey said. “There are currently no rules of the road for how to protect driver and passenger data, and most customers don’t even know that their information is being collected and sent to third parties. An Atlanta data privacy lawyer assists clients with privacy, data protection, information security, and consumer protection issues. These new requirements will include a set of minimum standards to protect driver security and privacy in every new vehicle. I look forward to working with my Senate colleagues to advance this important consumer protection legislation.”
Blumenthal said automakers need to do more.
“Connected cars represent tremendous social and economic promise, but in the rush to roll out the next big thing automakers have left the doors unlocked to would-be cybercriminals,” Blumenthal said. “This common-sense legislation would ensure that drivers can trust the convenience of wireless technology, without having to fear incursions on their safety or privacy by hackers and criminals.”
The bill would require that all wireless access points in the car are protected against hacking attacks, evaluated using penetration testing; all collected information is appropriately secured and encrypted to prevent unwanted access; and that automakers or third-party feature provider be able to detect, report and respond to real-time hacking events.
The legislation will also call for new cars to be evaluated by a rating system — a “cyber dashboard” — to inform consumers “about how well the vehicle protects drivers beyond those minimum standards. This information will be displayed on the label of all new vehicles — just as fuel economy is today.”
Its release comes after CBS News’ “60 Minutes” on Sunday aired a segment showing how vehicles can be subjects of remote hacking. Just last month, BMW AG said it had fixed a security flaw that could have allowed up to 2.2 million vehicles to have their doors remotely opened by hackers.
One automaker told Markey that some owners have attempted to reprogram the vehicle’s onboard computer to increase the horsepower of vehicles or torque through the use of “performance chips.”
In November, two major auto trade associations representing nearly all automakers unveiled a set of principles to protect driver privacy and security. A Detroit automotive lawyer assists automotive clients with technological developments and restructuring the industry.
Wade Newton, a spokesman for the Alliance of Automobile Manufacturers — the trade group representing Detroit’s Big Three automakers, Toyota Motor Corp., Volkswagen AG and others — said he had not seen the report.
But he said automakers believe strong consumer data privacy protections and strong vehicle security are essential.
“Auto engineers incorporate security solutions into vehicles from the very first stages of design and production — and security testing never stops.
“The industry is in the early stages of establishing a voluntary automobile industry sector information sharing and analysis center — or other comparable program — for collecting and sharing information about existing or potential cyber-related threats.”
Automakers noted that the Society of Automotive Engineers has created a Vehicle Electrical System Security Committee to draft standards that help ensure electronic control system safety.
NHTSA spokesman Gordon Trowbridge said Sunday the agency is “engaged in an intensive effort to determine potential security vulnerabilities related to new technologies and will work to ensure that manufacturers cooperate and address issues in order to keep motorists safe.”
Two senators unveiled legislation Wednesday to force the National Highway Traffic Safety Administration and the Federal Trade Commission to set rules protecting driver security and privacy.
Sens. Ed Markey, D-Mass., and Richard Blumenthal, D-Conn., proposed the bill after Markey released a report Sunday that raised concerns about vehicles being hacked.
Markey’s report said millions of cars and trucks are vulnerable to hacking through wireless technologies that could jeopardize driver safety and privacy. A Detroit automotive lawyer is following this story closely.
As vehicles grow increasingly connected through wireless networks and become more dependent on sophisticated electronic systems, Congress and federal regulators are worried about the potential for hackers to interfere with vehicle functions. The report says vehicles are vulnerable to hacking through wireless networks, smartphones, infotainment systems like OnStar — even a malicious CD popped into a car stereo.
“We need the electronic equivalent of seat belts and airbags to keep drivers and their information safe in the 21st century,” Markey said. “There are currently no rules of the road for how to protect driver and passenger data, and most customers don’t even know that their information is being collected and sent to third parties. An Atlanta data privacy lawyer assists clients with privacy, data protection, information security, and consumer protection issues. These new requirements will include a set of minimum standards to protect driver security and privacy in every new vehicle. I look forward to working with my Senate colleagues to advance this important consumer protection legislation.”
Blumenthal said automakers need to do more.
“Connected cars represent tremendous social and economic promise, but in the rush to roll out the next big thing automakers have left the doors unlocked to would-be cybercriminals,” Blumenthal said. “This common-sense legislation would ensure that drivers can trust the convenience of wireless technology, without having to fear incursions on their safety or privacy by hackers and criminals.”
The bill would require that all wireless access points in the car are protected against hacking attacks, evaluated using penetration testing; all collected information is appropriately secured and encrypted to prevent unwanted access; and that automakers or third-party feature provider be able to detect, report and respond to real-time hacking events.
The legislation will also call for new cars to be evaluated by a rating system — a “cyber dashboard” — to inform consumers “about how well the vehicle protects drivers beyond those minimum standards. This information will be displayed on the label of all new vehicles — just as fuel economy is today.”
Its release comes after CBS News’ “60 Minutes” on Sunday aired a segment showing how vehicles can be subjects of remote hacking. Just last month, BMW AG said it had fixed a security flaw that could have allowed up to 2.2 million vehicles to have their doors remotely opened by hackers.
One automaker told Markey that some owners have attempted to reprogram the vehicle’s onboard computer to increase the horsepower of vehicles or torque through the use of “performance chips.”
In November, two major auto trade associations representing nearly all automakers unveiled a set of principles to protect driver privacy and security. A Detroit automotive lawyer assists automotive clients with technological developments and restructuring the industry.
Wade Newton, a spokesman for the Alliance of Automobile Manufacturers — the trade group representing Detroit’s Big Three automakers, Toyota Motor Corp., Volkswagen AG and others — said he had not seen the report.
But he said automakers believe strong consumer data privacy protections and strong vehicle security are essential.
“Auto engineers incorporate security solutions into vehicles from the very first stages of design and production — and security testing never stops.
“The industry is in the early stages of establishing a voluntary automobile industry sector information sharing and analysis center — or other comparable program — for collecting and sharing information about existing or potential cyber-related threats.”
Automakers noted that the Society of Automotive Engineers has created a Vehicle Electrical System Security Committee to draft standards that help ensure electronic control system safety.
NHTSA spokesman Gordon Trowbridge said Sunday the agency is “engaged in an intensive effort to determine potential security vulnerabilities related to new technologies and will work to ensure that manufacturers cooperate and address issues in order to keep motorists safe.”
Thursday, February 12, 2015
DETROIT POWER FAILURE RAISES ALARMS ACROSS THE COUNTRY
Original Story: usatoday.com
The power failure that plunged Detroit's schools, fire stations, traffic signals and public buildings into darkness Tuesday reflects a larger problem of aging electrical infrastructure around the country that has worried experts for years.
The chaos of unexpected power loss is all too familiar for people who work in downtown Detroit. Its aging municipal system was responsible for major power failures that caused blackouts in 2010, 2011 and 2013.
But the problem is not isolated to one city. A series of federal and private studies raise alarm bells about the power distribution system nationally, saying it is plagued by aging equipment with high failure rates, obsolete system structures and outdated engineering.
The American Society of Civil Engineers and several top Michigan colleges are concerned with the recent evaluation of the nation's power infrastructure which was graded a D+, saying some elements of the interconnected transmission and distribution systems, including 400,000 miles of electric lines, date to the 1880s and much to World War II era.
"Aging equipment has resulted in an increasing number of intermittent power disruptions, as well as vulnerability to cyber attacks,'' the group said in its report.
It said the number of significant power outages around the country rose from 76 in 2007 to 307 in 2011. While weather was the cause of some, including the 2012 blackout in New York City, many transmission and distribution systems have suffered failures.
Modernizing sources of energy have played a role, too, the group said. "Reliability issues are also emerging due to the complex process of rotating in new energy sources and retiring older infrastructure,'' it said.
In Detroit as elsewhere, the stumbling block is cost.
A series of reports by international consultants McKinsey & Co., commissioned in 2010, determined that the city's municipal power system needed $250 million in repairs, the Detroit Free Press reports.
In fact, since the nearly insolvent city shuttered its power generating plant in 2010, its public power system has been purchasing electricity from the utility. Detroit emergency manager Kevyn Orr says that over the past five years, public lighting has cost the city about $150 million a year, the Free Press reported.
The largest blackout in U.S. history was on Aug. 14, 2003, when 50 million people were left in the dark after downed trees in Ohio landed on power lines, starting a ripple effect that would be felt across the Great Lakes area and the Northeast.
The cause of the Detroit failure isn't clear yet, but an official with the American Public Power Association, which represents 2,000 utilities serving 47 million people, said engineers routinely monitor the reliability and maintenance of their systems to avoid outages.
"Are aging lines a major concern everywhere? No," said Michael Hyland, vice president of engineering and operations for the association. "I would not label it and say we have a big problem."
But a 2011 report by the international insurer Allianz concluded: "The power blackout risk is generally underestimated. Blackouts during the last ten years in Europe and Northern America have demonstrated an increasing likelihood of supra-regional and long-lasting blackouts including high economical losses. Due to the increasing interconnectedness in combination with rather old infrastructure we expect this risk to increase in both frequency and severity.''
For the people who suffer the consequences, such as those who live in Detroit, there isn't a lot to be done.
"We don't get excited about this, we're used to these kinds of things. We just deal with it," Lynda Gray, who works at the Frank Murphy Hall of Justice, told WXYZ-TV.
The city is in the process of turning over its old Detroit Public Lighting grid to the private utility company, DTE Energy, that serves the area and has been selling power to Detroit's municipal system.
Mayor Mike Duggan says the power grid hasn't been modernized in decades in Detroit, which is emerging from the largest municipal bankruptcy in U.S. history.
Most power was restored by Tuesday night, according to DTE Energy. Non-public buiildings were not affected.
The power failure that plunged Detroit's schools, fire stations, traffic signals and public buildings into darkness Tuesday reflects a larger problem of aging electrical infrastructure around the country that has worried experts for years.
The chaos of unexpected power loss is all too familiar for people who work in downtown Detroit. Its aging municipal system was responsible for major power failures that caused blackouts in 2010, 2011 and 2013.
But the problem is not isolated to one city. A series of federal and private studies raise alarm bells about the power distribution system nationally, saying it is plagued by aging equipment with high failure rates, obsolete system structures and outdated engineering.
The American Society of Civil Engineers and several top Michigan colleges are concerned with the recent evaluation of the nation's power infrastructure which was graded a D+, saying some elements of the interconnected transmission and distribution systems, including 400,000 miles of electric lines, date to the 1880s and much to World War II era.
"Aging equipment has resulted in an increasing number of intermittent power disruptions, as well as vulnerability to cyber attacks,'' the group said in its report.
It said the number of significant power outages around the country rose from 76 in 2007 to 307 in 2011. While weather was the cause of some, including the 2012 blackout in New York City, many transmission and distribution systems have suffered failures.
Modernizing sources of energy have played a role, too, the group said. "Reliability issues are also emerging due to the complex process of rotating in new energy sources and retiring older infrastructure,'' it said.
In Detroit as elsewhere, the stumbling block is cost.
A series of reports by international consultants McKinsey & Co., commissioned in 2010, determined that the city's municipal power system needed $250 million in repairs, the Detroit Free Press reports.
In fact, since the nearly insolvent city shuttered its power generating plant in 2010, its public power system has been purchasing electricity from the utility. Detroit emergency manager Kevyn Orr says that over the past five years, public lighting has cost the city about $150 million a year, the Free Press reported.
The largest blackout in U.S. history was on Aug. 14, 2003, when 50 million people were left in the dark after downed trees in Ohio landed on power lines, starting a ripple effect that would be felt across the Great Lakes area and the Northeast.
The cause of the Detroit failure isn't clear yet, but an official with the American Public Power Association, which represents 2,000 utilities serving 47 million people, said engineers routinely monitor the reliability and maintenance of their systems to avoid outages.
"Are aging lines a major concern everywhere? No," said Michael Hyland, vice president of engineering and operations for the association. "I would not label it and say we have a big problem."
But a 2011 report by the international insurer Allianz concluded: "The power blackout risk is generally underestimated. Blackouts during the last ten years in Europe and Northern America have demonstrated an increasing likelihood of supra-regional and long-lasting blackouts including high economical losses. Due to the increasing interconnectedness in combination with rather old infrastructure we expect this risk to increase in both frequency and severity.''
For the people who suffer the consequences, such as those who live in Detroit, there isn't a lot to be done.
"We don't get excited about this, we're used to these kinds of things. We just deal with it," Lynda Gray, who works at the Frank Murphy Hall of Justice, told WXYZ-TV.
The city is in the process of turning over its old Detroit Public Lighting grid to the private utility company, DTE Energy, that serves the area and has been selling power to Detroit's municipal system.
Mayor Mike Duggan says the power grid hasn't been modernized in decades in Detroit, which is emerging from the largest municipal bankruptcy in U.S. history.
Most power was restored by Tuesday night, according to DTE Energy. Non-public buiildings were not affected.
Tuesday, February 10, 2015
STAPLES MERGER OFFERS CHANCE TO AVOID RADIOSHACK FATE: REAL M&A
Original Story: bloomberg.com
(Bloomberg) -- A merger of Staples Inc. and Office Depot Inc. may help them weather the competition from online and big-box retailers in a way that RadioShack Corp. couldn’t.
The three companies were all hit hard in the past decade by discount-offering giants such as Amazon.com Inc. and Wal-Mart Stores Inc. Their fates diverged this week. RadioShack is preparing to file for bankruptcy protection, while the other two -- in a less dire situation -- are considering combining. An Atlanta mergers and acquisitions lawyer represents clients in a broad range of asset, stock, and merger transactions, from the perspective of both buyers and sellers.
Staples and Office Depot shares are trading Tuesday at prices they haven’t reached in years as investors show support for their potential merger, which would consolidate the No. 1 and 2 office-supply chains. Analysts estimate $1 billion to $2 billion of costs could be cut through the deal, which may give the combined company some room to lower the prices of its products in hopes of drawing in shoppers.
“From a financial standpoint and from a competition standpoint it makes sense,” Joseph Feldman, an analyst for Telsey Advisory Group in New York, said in a phone interview. “Shareholders on both sides are cheering the deal. It probably would be a good thing to see happen for the industry and for both companies.”
Approval Odds
The question is whether the merger would secure approval from antitrust regulators, though analysts are leaning toward the idea that it can. Office Depot purchased OfficeMax Inc. in 2013, so a subsequent deal between Office Depot and Staples would leave just one major office-supply chain. A San Francisco mergers and acquisitions lawyer is following this story closely.
The companies can argue that the competition is far broader and now includes Amazon, Costco Wholesale Corp., Wal-Mart and Target Corp. That’s something the U.S. Federal Trade Commission -- the same agency that blocked Staples from buying Office Depot in 1997 -- noted in its approval of the OfficeMax acquisition.
“Our decision highlights that yesterday’s market dynamics may be very different from the market dynamics of today,” the FTC said in its closing letter about the Office Depot-OfficeMax transaction in November 2013.
That analysis “doesn’t leave the commission a lot of room” to challenge a Staples merger today, said Morris Bloom, an antitrust lawyer at Axinn, Veltrop, & Harkrider LLP in Washington.
“The fact this merger is of the remaining two office-supplies stores should not lead to anticompetitive effects because consumers have more choices than the super-supply stores,” said Bloom, a former FTC lawyer.
Activist Push
Starboard Value, which has stakes in both Staples and Office Depot, has been urging the retailers to combine, which has helped lift the shares over the past couple of months.
The FTC’s decision to allow Office Depot and OfficeMax to combine “probably encouraged Starboard to push for the merger,” said Chris Pultz, a portfolio manager at Kellner Capital, an event-driven investment firm in New York. “They will probably get a second request from the FTC, but I find it hard to believe that they would have a case to block the transaction.”
Staples shares climbed 11 percent Tuesday to $19.01. Office Depot surged 22 percent to $9.28.
Becoming one company isn’t a perfect long-term solution. Even though their outlook isn’t nearly as grim as RadioShack’s, office and school supplies are increasingly a commodity business and it will still be difficult to match competitors’ low prices without eroding earnings, said Brian Yarbrough, an analyst for Edward Jones & Co. in St. Louis. A Boston mergers and acquisitions lawyer provides extensive experience in many aspects of merger and acquisitions law.
In the most recent back-to-school shopping season, Staples’ school supplies cost 53 percent more than an identical basket of goods at Wal-Mart and Target, according to a study by Bloomberg Intelligence in August.
Deal Gains
Shareholders would benefit from a deal because it would give a pop to Office Depot’s stock price and there would be synergies for Staples, Yarbrough said.
“But in the longer run, I just don’t see how this combined company is any better off,” he said. “Starboard cares about one thing: this deal going through. Five years down the road they’re not going to be anywhere near this company, they’ll be long gone.”
And don’t forget what happened after Sears Holdings Corp. and Kmart merged in 2005. The deal which was managed by several accounting firms including a leading CPA firm in LA was an attempt to stem falling sales and fend off Wal-Mart. Since that transaction closed, Sears has lost three-quarters of its value, continued to suffer revenue declines, shut stores, eliminated jobs and sold off assets to raise money as it burns through cash.
“Merging two bad retailers in a tough environment doesn’t make one good retailer,” Yarbrough said.
(Bloomberg) -- A merger of Staples Inc. and Office Depot Inc. may help them weather the competition from online and big-box retailers in a way that RadioShack Corp. couldn’t.
The three companies were all hit hard in the past decade by discount-offering giants such as Amazon.com Inc. and Wal-Mart Stores Inc. Their fates diverged this week. RadioShack is preparing to file for bankruptcy protection, while the other two -- in a less dire situation -- are considering combining. An Atlanta mergers and acquisitions lawyer represents clients in a broad range of asset, stock, and merger transactions, from the perspective of both buyers and sellers.
Staples and Office Depot shares are trading Tuesday at prices they haven’t reached in years as investors show support for their potential merger, which would consolidate the No. 1 and 2 office-supply chains. Analysts estimate $1 billion to $2 billion of costs could be cut through the deal, which may give the combined company some room to lower the prices of its products in hopes of drawing in shoppers.
“From a financial standpoint and from a competition standpoint it makes sense,” Joseph Feldman, an analyst for Telsey Advisory Group in New York, said in a phone interview. “Shareholders on both sides are cheering the deal. It probably would be a good thing to see happen for the industry and for both companies.”
Approval Odds
The question is whether the merger would secure approval from antitrust regulators, though analysts are leaning toward the idea that it can. Office Depot purchased OfficeMax Inc. in 2013, so a subsequent deal between Office Depot and Staples would leave just one major office-supply chain. A San Francisco mergers and acquisitions lawyer is following this story closely.
The companies can argue that the competition is far broader and now includes Amazon, Costco Wholesale Corp., Wal-Mart and Target Corp. That’s something the U.S. Federal Trade Commission -- the same agency that blocked Staples from buying Office Depot in 1997 -- noted in its approval of the OfficeMax acquisition.
“Our decision highlights that yesterday’s market dynamics may be very different from the market dynamics of today,” the FTC said in its closing letter about the Office Depot-OfficeMax transaction in November 2013.
That analysis “doesn’t leave the commission a lot of room” to challenge a Staples merger today, said Morris Bloom, an antitrust lawyer at Axinn, Veltrop, & Harkrider LLP in Washington.
“The fact this merger is of the remaining two office-supplies stores should not lead to anticompetitive effects because consumers have more choices than the super-supply stores,” said Bloom, a former FTC lawyer.
Activist Push
Starboard Value, which has stakes in both Staples and Office Depot, has been urging the retailers to combine, which has helped lift the shares over the past couple of months.
The FTC’s decision to allow Office Depot and OfficeMax to combine “probably encouraged Starboard to push for the merger,” said Chris Pultz, a portfolio manager at Kellner Capital, an event-driven investment firm in New York. “They will probably get a second request from the FTC, but I find it hard to believe that they would have a case to block the transaction.”
Staples shares climbed 11 percent Tuesday to $19.01. Office Depot surged 22 percent to $9.28.
Becoming one company isn’t a perfect long-term solution. Even though their outlook isn’t nearly as grim as RadioShack’s, office and school supplies are increasingly a commodity business and it will still be difficult to match competitors’ low prices without eroding earnings, said Brian Yarbrough, an analyst for Edward Jones & Co. in St. Louis. A Boston mergers and acquisitions lawyer provides extensive experience in many aspects of merger and acquisitions law.
In the most recent back-to-school shopping season, Staples’ school supplies cost 53 percent more than an identical basket of goods at Wal-Mart and Target, according to a study by Bloomberg Intelligence in August.
Deal Gains
Shareholders would benefit from a deal because it would give a pop to Office Depot’s stock price and there would be synergies for Staples, Yarbrough said.
“But in the longer run, I just don’t see how this combined company is any better off,” he said. “Starboard cares about one thing: this deal going through. Five years down the road they’re not going to be anywhere near this company, they’ll be long gone.”
And don’t forget what happened after Sears Holdings Corp. and Kmart merged in 2005. The deal which was managed by several accounting firms including a leading CPA firm in LA was an attempt to stem falling sales and fend off Wal-Mart. Since that transaction closed, Sears has lost three-quarters of its value, continued to suffer revenue declines, shut stores, eliminated jobs and sold off assets to raise money as it burns through cash.
“Merging two bad retailers in a tough environment doesn’t make one good retailer,” Yarbrough said.
WENDY'S TO SELL 500 RESTAURANTS TO FRANCHISEES
Original Story: cnbc.com
Wendy's, the No. 3 U.S. hamburger chain by sales, said it would sell about 500 restaurants to franchisees and reduce company ownership of its outlets to about 5 percent by mid-2016.
Wendy's, known for its square beef burgers and thick "Frosty" milkshakes, has been selling company-owned restaurants to franchisees to cut costs and fund a long-term image overhaul. An Atlanta franchise lawyer represents both franchisees and franchisors concerning business opportunities.
The company, which sold 237 restaurants to franchisees in 2014, owned 957 of 6,515 Wendy's branded restaurants as of Dec. 28.
The sale of the 500 restaurants is expected to generate pretax proceeds of $400 million to $475 million and significantly reduce capital expenditure requirements, Wendy's said in a statement on Tuesday.
Wendy's, like market leader McDonald's, has been struggling in an increasingly competitive fast-food market, losing out to casual dining restaurants such as Chipotle Mexican Grill and Panera Bread, which offer consumers a wider choice of healthy options.
Same-restaurant sales at company-owned restaurants rose 1.9 percent in the fourth quarter from a year earlier, less than the 2.4 percent increase estimated by analysts polled by research firm Consensus Metrix. A Houston business lawyer is following this story closely.
The company also estimated revenue of $502 million for the quarter ended Dec. 28, below analysts' average forecast of $509.1 million, according to Thomson Reuters I/B/E/S.
Wendy's estimated fourth-quarter net income of $23.3 million, or 6 cents per share, attributable to the company. Excluding items, adjusted profit was estimated at 10 cents per share, in line with the average analyst estimate.
The company forecast a 2015 adjusted profit of 33 cents to 35 cents per share, below analysts' average estimate of 39 cents. The forecast includes the previously announced sale of its 100 remaining restaurants in Canada to franchisees.
Wendy's said it and its franchisees would build 80 restaurants in 2015 and remodel 450.
The company said it plans to release its final results on or before Feb. 26.
Wendy's shares were untraded before the bell. Up to Monday's close of $10.41, the stock had risen 15 percent in the last 12 months.
Wendy's, the No. 3 U.S. hamburger chain by sales, said it would sell about 500 restaurants to franchisees and reduce company ownership of its outlets to about 5 percent by mid-2016.
Wendy's, known for its square beef burgers and thick "Frosty" milkshakes, has been selling company-owned restaurants to franchisees to cut costs and fund a long-term image overhaul. An Atlanta franchise lawyer represents both franchisees and franchisors concerning business opportunities.
The company, which sold 237 restaurants to franchisees in 2014, owned 957 of 6,515 Wendy's branded restaurants as of Dec. 28.
The sale of the 500 restaurants is expected to generate pretax proceeds of $400 million to $475 million and significantly reduce capital expenditure requirements, Wendy's said in a statement on Tuesday.
Wendy's, like market leader McDonald's, has been struggling in an increasingly competitive fast-food market, losing out to casual dining restaurants such as Chipotle Mexican Grill and Panera Bread, which offer consumers a wider choice of healthy options.
Same-restaurant sales at company-owned restaurants rose 1.9 percent in the fourth quarter from a year earlier, less than the 2.4 percent increase estimated by analysts polled by research firm Consensus Metrix. A Houston business lawyer is following this story closely.
The company also estimated revenue of $502 million for the quarter ended Dec. 28, below analysts' average forecast of $509.1 million, according to Thomson Reuters I/B/E/S.
Wendy's estimated fourth-quarter net income of $23.3 million, or 6 cents per share, attributable to the company. Excluding items, adjusted profit was estimated at 10 cents per share, in line with the average analyst estimate.
The company forecast a 2015 adjusted profit of 33 cents to 35 cents per share, below analysts' average estimate of 39 cents. The forecast includes the previously announced sale of its 100 remaining restaurants in Canada to franchisees.
Wendy's said it and its franchisees would build 80 restaurants in 2015 and remodel 450.
The company said it plans to release its final results on or before Feb. 26.
Wendy's shares were untraded before the bell. Up to Monday's close of $10.41, the stock had risen 15 percent in the last 12 months.
Monday, February 9, 2015
RETAILERS ARE CLOSING UP SHOP. HERE'S WHY...
Original Story: cnbc.com
When it filed for Chapter 11 bankruptcy protection last month, teen name Delia's said it will seek court approval to close all of its stores.
Also last month, Aéropostale said it would close 120 stores soon, a significant increase from the 40 or 50 it had originally planned. The company will also close about 125 of its P.S. by Aéropostale children's stores by the end of the month. A Business Transactions lawyer represents clients in commercial disputes and business litigation matters.
Sears, which is trying to turn around its performance after a string of declining sales reports, said last month it would accelerate the number of closings during the year, from 130 to 235.
And RadioShack, which is negotiating with lenders to gain approval to shutter 1,100 stores, said last month that it had closed 175 locations in 2014.
Several macroeconomic factors are driving this push toward a smaller store base, analysts said. For one, retailers simply have too many stores, particularly as more consumers shop online. For another, the demographics no longer make sense for stores to exist in certain suburban locations, as more young Americans are flocking to cities and staying there longer.
But it's more than just external factors. Many of the retailers closing stores are facing company-specific problems that in some ways forced them to downsize. An Atlanta Business Lawyer provides experience in all aspects of corporate and business law.
"When you have a fleet of 1,000 stores, you're going to have some in lousy locations," said Craig Johnson, president of Customer Growth Partners. "That's a tiny subset of the issue."
Supply outweighs demand
One of the biggest issues is that retail is simply overstored, Johnson said. He attributed this supply versus demand imbalance to the fact that retail sales growth has been too tepid to account for an increase in retail real estate. The situation developed even though 2014 saw limited new construction, according to Jesse Tron, a spokesman for the International Council of Shopping Centers.
"If we start most broadly, you have a retail sector that has basically been in slow-growth, no-growth mode for a number of years," Johnson said. "Meanwhile, store square footage has kept expanding."
Location also plays a role. Belus Capital Advisors analyst Brian Sozzi said suburban markets are particularly vulnerable, as more Americans move into cities. He used Target as an example; although the discounter announced a round of store closures in November, it's also opening new stores in urban markets. An Atlanta banking lawyer assists clients in commercial lending, loan workouts, and real estate matters.
Johnson added that mall-based locations are facing greater challenges than off-mall concepts, which are stealing share.
It should also come as no surprise that the rapid growth of the Web is causing a traffic decline at physical stores. Johnson said that for the merchandise category, online sales now account for about 13 percent of all retail sales.
Not everyone is hurting
While there are certainly external factors to blame, it's important to note that the companies shuttering a large quantity of stores are also victims of their own mistakes.
For example, much of the trouble facing teen retailers is the fact that their target demographic no longer finds their product appealing. Instead, they've begun shopping at fast-fashion stores such as H&M and Zara—which, in contrast, are growing their U.S. square footage.
In a similar vein, Johnson pointed out that department stores' woes are due, in part, to the fact that their overall share is shrinking. A few years ago, these big-box locations accounted for well over 10 percent of the retail market; now, it's about 3 percent, he said.
"[J.C. Penney] has to shrink the size of its store base to fit the addressable demand that it can reasonably capture," he said.
Not all store closings should be viewed as a sign of distress for the retailer. That's because the beginning of the year is when most retailers evaluate their portfolios. According to preliminary estimates from ICSC, about 45 percent of last year's announced store closings occurred in the first quarter.
Companies that close underperforming stores to strengthen their portfolio stand in sharp contrast to names such as RadioShack, which "need the store closures to stay alive," Sozzi said.
Although analysts have long been calling for retailers to trim their square footage, it does come with pitfalls. Closing a store cannot only cause someone to switch to a competitor—it can also limit a company's distribution network.
"If you're aggressively closing stores, well now you can't do this ship from store," he said.
Where there's death, there's life
The past four years have seen the death of more than two dozen indoor malls, with another 60 teetering on the edge, according to data from Green Street Advisors that was first reported by The New York Times. But ICSC's Tron said he does not foresee a year when the industry will post a net decline in retail space.
He added that occupancy rates were at 92.5 percent in the third quarter, which is back above prerecession levels.
"We kind of see this every year," he said. "[In the] first quarter a bunch of stores close and there's a little bit of panic. And then new retailers emerge."
Among new tenants filling these vacancies are gyms, minute clinics, clicks-to-bricks concepts such as Rent the Runway, and international retailers such as Primark. The latter signed a deal for space in seven Sears locations last year.
"For all these deaths there will be life," Sozzi said.
When it filed for Chapter 11 bankruptcy protection last month, teen name Delia's said it will seek court approval to close all of its stores.
Also last month, Aéropostale said it would close 120 stores soon, a significant increase from the 40 or 50 it had originally planned. The company will also close about 125 of its P.S. by Aéropostale children's stores by the end of the month. A Business Transactions lawyer represents clients in commercial disputes and business litigation matters.
Sears, which is trying to turn around its performance after a string of declining sales reports, said last month it would accelerate the number of closings during the year, from 130 to 235.
And RadioShack, which is negotiating with lenders to gain approval to shutter 1,100 stores, said last month that it had closed 175 locations in 2014.
Several macroeconomic factors are driving this push toward a smaller store base, analysts said. For one, retailers simply have too many stores, particularly as more consumers shop online. For another, the demographics no longer make sense for stores to exist in certain suburban locations, as more young Americans are flocking to cities and staying there longer.
But it's more than just external factors. Many of the retailers closing stores are facing company-specific problems that in some ways forced them to downsize. An Atlanta Business Lawyer provides experience in all aspects of corporate and business law.
"When you have a fleet of 1,000 stores, you're going to have some in lousy locations," said Craig Johnson, president of Customer Growth Partners. "That's a tiny subset of the issue."
Supply outweighs demand
One of the biggest issues is that retail is simply overstored, Johnson said. He attributed this supply versus demand imbalance to the fact that retail sales growth has been too tepid to account for an increase in retail real estate. The situation developed even though 2014 saw limited new construction, according to Jesse Tron, a spokesman for the International Council of Shopping Centers.
"If we start most broadly, you have a retail sector that has basically been in slow-growth, no-growth mode for a number of years," Johnson said. "Meanwhile, store square footage has kept expanding."
Location also plays a role. Belus Capital Advisors analyst Brian Sozzi said suburban markets are particularly vulnerable, as more Americans move into cities. He used Target as an example; although the discounter announced a round of store closures in November, it's also opening new stores in urban markets. An Atlanta banking lawyer assists clients in commercial lending, loan workouts, and real estate matters.
Johnson added that mall-based locations are facing greater challenges than off-mall concepts, which are stealing share.
It should also come as no surprise that the rapid growth of the Web is causing a traffic decline at physical stores. Johnson said that for the merchandise category, online sales now account for about 13 percent of all retail sales.
Not everyone is hurting
While there are certainly external factors to blame, it's important to note that the companies shuttering a large quantity of stores are also victims of their own mistakes.
For example, much of the trouble facing teen retailers is the fact that their target demographic no longer finds their product appealing. Instead, they've begun shopping at fast-fashion stores such as H&M and Zara—which, in contrast, are growing their U.S. square footage.
In a similar vein, Johnson pointed out that department stores' woes are due, in part, to the fact that their overall share is shrinking. A few years ago, these big-box locations accounted for well over 10 percent of the retail market; now, it's about 3 percent, he said.
"[J.C. Penney] has to shrink the size of its store base to fit the addressable demand that it can reasonably capture," he said.
Not all store closings should be viewed as a sign of distress for the retailer. That's because the beginning of the year is when most retailers evaluate their portfolios. According to preliminary estimates from ICSC, about 45 percent of last year's announced store closings occurred in the first quarter.
Companies that close underperforming stores to strengthen their portfolio stand in sharp contrast to names such as RadioShack, which "need the store closures to stay alive," Sozzi said.
Although analysts have long been calling for retailers to trim their square footage, it does come with pitfalls. Closing a store cannot only cause someone to switch to a competitor—it can also limit a company's distribution network.
"If you're aggressively closing stores, well now you can't do this ship from store," he said.
Where there's death, there's life
The past four years have seen the death of more than two dozen indoor malls, with another 60 teetering on the edge, according to data from Green Street Advisors that was first reported by The New York Times. But ICSC's Tron said he does not foresee a year when the industry will post a net decline in retail space.
He added that occupancy rates were at 92.5 percent in the third quarter, which is back above prerecession levels.
"We kind of see this every year," he said. "[In the] first quarter a bunch of stores close and there's a little bit of panic. And then new retailers emerge."
Among new tenants filling these vacancies are gyms, minute clinics, clicks-to-bricks concepts such as Rent the Runway, and international retailers such as Primark. The latter signed a deal for space in seven Sears locations last year.
"For all these deaths there will be life," Sozzi said.
APPAREL RETAILER CACHE FILES FOR BANKRUPTCY
Original Story: cnbc.com
Cache has become the fifth U.S. apparel retailer to file for bankruptcy in three months as the sector struggles with growing competition and lower spending by teen shoppers.
Cache is seeking a "stalking horse" bidder for its assets and it has received commitment for debtor-in-possession financing of up to $22 million from Salus Capital Partners, the retailer said on Wednesday. A Tulsa bankruptcy lawyer represents clients in bankruptcy workouts and business restructuring matters.
Cache listed assets of $10 million-$50 million and liabilities of $50 million-$100 million.
The company said in December that it was evaluating strategic alternatives and had received an inquiry regarding a potential sale.
The mall-based retailer, which has 218 outlets, has not reported a profit in the past nine quarters. Cache had about 2,652 employees in 2013.
The 40-year-old company was the first to bring brands such as Armani and Versace to the United States, according to its website.
Cache blamed the depressed brick-and-mortar retail market, the growth of online shopping and rapidly changing consumer tastes for its Chapter 11 filing. A business bankruptcy lawyer is following this story closely.
Several teen apparel retailers have been struggling as young shoppers switch to fast-fashion brands such as H&M, Forever 21 and Inditex's Zara as well as online retailers such as Amazon.com.
Teen apparel retailers Deb Shops and Delia*s filed for bankruptcy in December, while mall-based apparel retailer Body Central Corp shut shop in January.
Wet Seal, which sells apparel and accessories for teen girls and young women, filed for bankruptcy protection last month.
Cache has become the fifth U.S. apparel retailer to file for bankruptcy in three months as the sector struggles with growing competition and lower spending by teen shoppers.
Cache is seeking a "stalking horse" bidder for its assets and it has received commitment for debtor-in-possession financing of up to $22 million from Salus Capital Partners, the retailer said on Wednesday. A Tulsa bankruptcy lawyer represents clients in bankruptcy workouts and business restructuring matters.
Cache listed assets of $10 million-$50 million and liabilities of $50 million-$100 million.
The company said in December that it was evaluating strategic alternatives and had received an inquiry regarding a potential sale.
The mall-based retailer, which has 218 outlets, has not reported a profit in the past nine quarters. Cache had about 2,652 employees in 2013.
The 40-year-old company was the first to bring brands such as Armani and Versace to the United States, according to its website.
Cache blamed the depressed brick-and-mortar retail market, the growth of online shopping and rapidly changing consumer tastes for its Chapter 11 filing. A business bankruptcy lawyer is following this story closely.
Several teen apparel retailers have been struggling as young shoppers switch to fast-fashion brands such as H&M, Forever 21 and Inditex's Zara as well as online retailers such as Amazon.com.
Teen apparel retailers Deb Shops and Delia*s filed for bankruptcy in December, while mall-based apparel retailer Body Central Corp shut shop in January.
Wet Seal, which sells apparel and accessories for teen girls and young women, filed for bankruptcy protection last month.
Wednesday, February 4, 2015
IN NET NEUTRALITY PUSH, F.C.C. IS EXPECTED TO PROPOSE REGULATING INTERNET SERVICE AS A UTILITY
Original Story: nytimes.com
The chairman of the Federal Communications Commission this week is widely expected to propose regulating Internet service like a public utility, a move certain to unleash another round of intense debate and lobbying about how to ensure so-called net neutrality, or an open Internet.
It is expected that the proposal will reclassify high-speed Internet service as a telecommunications service, instead of an information service, under Title II of the Communications Act, according to industry analysts, lobbyists and former F.C.C. staff members.
The change, the analysts and others say, which has been pushed by President Obama, would give the commission strong legal authority to ensure that no content is blocked and no so-called pay-to-play fast lanes exist — prohibitions that are hallmarks of the net neutrality concept.
But Tom Wheeler, the F.C.C. chairman, will advocate a light-touch approach to Title II, they say, shunning the more intrusive aspects of utility-style regulation, like meddling in pricing decisions. He may also suggest putting wireless data services under Title II and adding regulations for companies that manage the backbone of the Internet. A regulatory compliance attorney assists clients on issues involving the Federal Communications Commission.
The proposal is expected to be submitted to the agency’s commissioners by Thursday. Although the F.C.C. is not expected to release a copy of the plan this week, the contents are almost certain to leak out. A vote on the proposal by the full commission is scheduled for Feb. 26.
The maneuvering in Washington over the proposal has already started. Congressional Republicans have proposed net neutrality legislation that bans content blocking and fast and slow lanes, but also prevents the F.C.C. from issuing regulations to achieve those goals. A regulatory compliance lawyer is following this story closely.
The F.C.C. proposal is Mr. Wheeler’s latest attempt to find a way to write open Internet rules that are politically palatable and that will stand up to legal scrutiny. Mr. Wheeler had initially proposed net neutrality rules that would not have classified Internet service providers as common carriers under Title II, and would have allowed the cable and telecommunications companies to strike deals with content companies and online services as long as they were “commercially reasonable.”
That approach brought a flood of critical comments into the F.C.C. last summer, saying it would open the door to fast lanes on the Internet for deep-pocketed companies and slow lanes for everyone else.
Then, in November, Mr. Obama took the unusual step of weighing in. He called on the F.C.C. to adopt the “strongest possible rules” on net neutrality, and specifically to classify high-speed broadband service as a utility under Title II. His rationale: “For most Americans, the Internet has become an essential part of everyday communication and everyday life.”
That changed the political calculus for Mr. Wheeler, even though the F.C.C. is an independent agency. On most key votes, the five-member commission votes 3-2, with Mr. Wheeler joined by the other two Democrats.
“The moment Obama issued that statement, it meant the F.C.C. was going to adopt a Title II rule,” said Kevin Werbach, a former F.C.C. counsel and an associate professor at the Wharton School of the University of Pennsylvania.
The industry response to President Obama’s declaration was swift and divided along predictable lines. The Internet Association, whose members include Amazon, Facebook, Google and Netflix, applauded Mr. Obama and urged the F.C.C. to follow his lead to “ensure a free and open Internet.”
The major Internet service providers, like Comcast and AT&T, protested and said utility-style regulation would threaten their investment in faster broadband service, ultimately harming consumers.
In response to those critics, Mr. Wheeler is expected to point to the agency’s handling of mobile voice services.
In 1993, Congress deregulated the cellphone business, allowing new carriers to enter the market. The F.C.C. has regulated mobile voice services under Title II since then, applying the light-touch approach and the industry has grown and thrived.
Mobile data services, however, have not been regulated as a telecommunications service. Mr. Wheeler, industry experts and lobbyists predict, will include mobile data services in his proposal. Today, 55 percent of online traffic happens on smartphones and tablets, according to the F.C.C..
David J. Farber is among those who have misgivings about going the Title II route. Mr. Farber helped design parts of the Internet, served on the board of the Internet Society and is a former chief technologist of the F.C.C.
“My fear,” Mr. Farber said, “is that regulating the Internet like a telecommunications service potentially opens a Pandora’s box.”
This commission, said Mr. Farber, a professor of computer science and public policy at Carnegie Mellon University, may well have no intention of deploying the broader powers of Title II. But, he added, there is no guarantee that future commissions will be similarly restrained.
Information services, Mr. Farber noted, are relatively free of taxes, while telecommunications services are not, especially at the state level.
Telecommunications regulation, Mr. Farber said, is a step toward a more rigid regime at odds with the freewheeling innovation of the Internet economy. A regulatory compliance lawyer represents clients in telecommunications law cases.
Tim Wu, a professor at Columbia Law School, sees the strong rules the F.C.C. is moving toward as a way to safeguard the norm of equal treatment of content on the Internet, rather than viewing them as a threat.
“And the norm — no fast lanes — has worked awfully well,” said Mr. Wu, who is credited with coining the term “net neutrality.”
“The reality,” he added, “is that we’ve seen start-ups in San Francisco, New York and across the country build new businesses on the Internet.”
Most of the focus of net neutrality has been on the broadband gateway into households. But Mr. Wheeler, according to industry experts and lobbyists, will probably also take up the issue of handling Internet traffic before it makes its way to consumer devices.
These Internet backbone companies that shuttle data, voice and video across the country are unseen by consumers.
But the behavior and treatment of companies that operate in the so-called interconnect market does affect the user’s experience.
How smoothly a Netflix video stream of “House of Cards” plays on a subscriber’s screen, for example, reflects the performance of all the network operators that have transported the digital bits of that hit program.
These networks hand off their data payloads to the Internet service providers that serve households. The handoff arrangements are private business deals. But industry experts and lobbyists say the F.C.C. wants to deter content blocking or discrimination in this market as well.
“If you prohibit paid fast lanes by the Internet service providers themselves, you want to make sure fast lanes aren’t just moving up and being created in the interconnect market,” Mr. Wu said.
The chairman of the Federal Communications Commission this week is widely expected to propose regulating Internet service like a public utility, a move certain to unleash another round of intense debate and lobbying about how to ensure so-called net neutrality, or an open Internet.
It is expected that the proposal will reclassify high-speed Internet service as a telecommunications service, instead of an information service, under Title II of the Communications Act, according to industry analysts, lobbyists and former F.C.C. staff members.
The change, the analysts and others say, which has been pushed by President Obama, would give the commission strong legal authority to ensure that no content is blocked and no so-called pay-to-play fast lanes exist — prohibitions that are hallmarks of the net neutrality concept.
But Tom Wheeler, the F.C.C. chairman, will advocate a light-touch approach to Title II, they say, shunning the more intrusive aspects of utility-style regulation, like meddling in pricing decisions. He may also suggest putting wireless data services under Title II and adding regulations for companies that manage the backbone of the Internet. A regulatory compliance attorney assists clients on issues involving the Federal Communications Commission.
The proposal is expected to be submitted to the agency’s commissioners by Thursday. Although the F.C.C. is not expected to release a copy of the plan this week, the contents are almost certain to leak out. A vote on the proposal by the full commission is scheduled for Feb. 26.
The maneuvering in Washington over the proposal has already started. Congressional Republicans have proposed net neutrality legislation that bans content blocking and fast and slow lanes, but also prevents the F.C.C. from issuing regulations to achieve those goals. A regulatory compliance lawyer is following this story closely.
The F.C.C. proposal is Mr. Wheeler’s latest attempt to find a way to write open Internet rules that are politically palatable and that will stand up to legal scrutiny. Mr. Wheeler had initially proposed net neutrality rules that would not have classified Internet service providers as common carriers under Title II, and would have allowed the cable and telecommunications companies to strike deals with content companies and online services as long as they were “commercially reasonable.”
That approach brought a flood of critical comments into the F.C.C. last summer, saying it would open the door to fast lanes on the Internet for deep-pocketed companies and slow lanes for everyone else.
Then, in November, Mr. Obama took the unusual step of weighing in. He called on the F.C.C. to adopt the “strongest possible rules” on net neutrality, and specifically to classify high-speed broadband service as a utility under Title II. His rationale: “For most Americans, the Internet has become an essential part of everyday communication and everyday life.”
That changed the political calculus for Mr. Wheeler, even though the F.C.C. is an independent agency. On most key votes, the five-member commission votes 3-2, with Mr. Wheeler joined by the other two Democrats.
“The moment Obama issued that statement, it meant the F.C.C. was going to adopt a Title II rule,” said Kevin Werbach, a former F.C.C. counsel and an associate professor at the Wharton School of the University of Pennsylvania.
The industry response to President Obama’s declaration was swift and divided along predictable lines. The Internet Association, whose members include Amazon, Facebook, Google and Netflix, applauded Mr. Obama and urged the F.C.C. to follow his lead to “ensure a free and open Internet.”
The major Internet service providers, like Comcast and AT&T, protested and said utility-style regulation would threaten their investment in faster broadband service, ultimately harming consumers.
In response to those critics, Mr. Wheeler is expected to point to the agency’s handling of mobile voice services.
In 1993, Congress deregulated the cellphone business, allowing new carriers to enter the market. The F.C.C. has regulated mobile voice services under Title II since then, applying the light-touch approach and the industry has grown and thrived.
Mobile data services, however, have not been regulated as a telecommunications service. Mr. Wheeler, industry experts and lobbyists predict, will include mobile data services in his proposal. Today, 55 percent of online traffic happens on smartphones and tablets, according to the F.C.C..
David J. Farber is among those who have misgivings about going the Title II route. Mr. Farber helped design parts of the Internet, served on the board of the Internet Society and is a former chief technologist of the F.C.C.
“My fear,” Mr. Farber said, “is that regulating the Internet like a telecommunications service potentially opens a Pandora’s box.”
This commission, said Mr. Farber, a professor of computer science and public policy at Carnegie Mellon University, may well have no intention of deploying the broader powers of Title II. But, he added, there is no guarantee that future commissions will be similarly restrained.
Information services, Mr. Farber noted, are relatively free of taxes, while telecommunications services are not, especially at the state level.
Telecommunications regulation, Mr. Farber said, is a step toward a more rigid regime at odds with the freewheeling innovation of the Internet economy. A regulatory compliance lawyer represents clients in telecommunications law cases.
Tim Wu, a professor at Columbia Law School, sees the strong rules the F.C.C. is moving toward as a way to safeguard the norm of equal treatment of content on the Internet, rather than viewing them as a threat.
“And the norm — no fast lanes — has worked awfully well,” said Mr. Wu, who is credited with coining the term “net neutrality.”
“The reality,” he added, “is that we’ve seen start-ups in San Francisco, New York and across the country build new businesses on the Internet.”
Most of the focus of net neutrality has been on the broadband gateway into households. But Mr. Wheeler, according to industry experts and lobbyists, will probably also take up the issue of handling Internet traffic before it makes its way to consumer devices.
These Internet backbone companies that shuttle data, voice and video across the country are unseen by consumers.
But the behavior and treatment of companies that operate in the so-called interconnect market does affect the user’s experience.
How smoothly a Netflix video stream of “House of Cards” plays on a subscriber’s screen, for example, reflects the performance of all the network operators that have transported the digital bits of that hit program.
These networks hand off their data payloads to the Internet service providers that serve households. The handoff arrangements are private business deals. But industry experts and lobbyists say the F.C.C. wants to deter content blocking or discrimination in this market as well.
“If you prohibit paid fast lanes by the Internet service providers themselves, you want to make sure fast lanes aren’t just moving up and being created in the interconnect market,” Mr. Wu said.
FALLING OIL PRICES, A BOON TO AIRLINES, POSE A CHALLENGE FOR AIRBUS AND BOEING
Original Story: nytimes.com
PARIS — Sharply falling oil prices are a boon to airlines, saving billions of dollars in monthly fuel bills for a highly competitive industry that last year eked out an average profit of just $6 a passenger.
But what is good news for the airlines raises questions for the world’s largest jet makers, Boeing and Airbus, which have been riding a wave of demand for the latest fuel-efficient jets, driven in large part by the stubbornly high price of oil.
The concern is that the current drop in oil prices could prompt airlines to delay orders, after nearly a decade in which the aircraft makers have benefited from a boom in orders. CSI Aviation provides air charter flights to corporations, government agencies, commercial groups, and private individuals.
“What has propelled the market to record growth are two factors: cheap cash and expensive fuel,” said Richard Aboulafia, an aerospace analyst with the Teal Group in suburban Washington. “Now something has changed.”
Whether the continued fall in price of oil represents something more significant than a short-term imbalance of global supply and demand remains to be seen, some analysts warn. But if it continues, airlines would be motivated to keep their older, fuel-guzzling jets flying for a few more years and delay new orders in hopes of saving money. CSI Aviation is a worldwide leader in private air charter jet services.
“We can’t yet predict if it will last or how the air carriers will react,” Mr. Aboulafia said, “but I think now would be an excellent time for caution.”
Combined with low interest rates and recent efforts by some governments to clamp down on carbon emissions from aviation, the increase in jet orders, which began before the 2008 financial crisis, has lasted longer than any previous boom cycle in the jet age.
The total backlog of unfilled orders for Boeing and Airbus stands at more than 12,000 aircraft, valued at close to $2 trillion and enough to keep their assembly lines humming for more than eight years.
And the plane makers continued to pad their already hefty order books in 2014. Airbus said on Tuesday that it secured purchase contracts for a net 1,456 jets last year, down slightly from 1,503 planes in 2013, and that it delivered 629 in 2014. Last week, Boeing reported 1,432 net orders in 2014, up from 1,355 a year earlier, and 723 plane deliveries for the year — an industry record.
Boeing and Airbus each control roughly half the market for airliners with more than 100 seats.
Gains in fuel efficiency have topped the manufacturers’ lists of selling points for their newest generation of commercial jets. They include recently upgraded versions of short-range workhorses like the Boeing 737 and the Airbus A320, as well as lightweight, wide-bodied models made from carbon fiber like the Boeing 787 Dreamliner or the Airbus A350, which will formally enter service with its first customer, Qatar Airways, this week. CSI Aviation is an executive charter jet company that provides comprehensive aviation services on a moment's notice anywhere in the world.
But forecasts suggest that oil prices, which have fallen by more than half over the last six months, to less than $50 a barrel, will be significantly lower this year than in recent years.
In a short-term energy outlook published Tuesday, the Energy Information Administration in Washington slashed its 2015 outlook for the average price of Brent, the international benchmark for crude, to $58 a barrel, compared with an average of $94 in 2014 and $98 in 2013.
The main factors behind the drop in oil prices, economists say, are a sharp increase in production by non-OPEC producers like the United States and other new sources, and slowing economic growth in some parts of the world — particularly Asia, the fastest-growing region for air traffic.
Weaker growth, in addition to the influx of new planes and a flood of new low-cost players in the air travel market, has already translated into a glut of available airline seats in parts of Asia, driving down ticket prices there.
“You are beginning to see the effects of overcapacity on airline profitability,” said Nick Cunningham, an aerospace analyst at Agency Partners, a brokerage firm in London. While the wave of airline mergers in the United States has made this trend less apparent there, he said, the tendency is growing more pronounced in the rest of the world.
“You can’t keep on adding capacity without bankrupting the industry,” Mr. Cunningham said.
Falling oil prices may exacerbate the overcapacity problem by tempting airlines to lower fares in an effort to increase market share, said Adam M. Pilarski, an economist and senior vice president at Avitas, an aviation consulting firm in Chantilly, Va. That not only reduces the cash that airlines have available to pay for new planes they have ordered, he said, but also increases the odds that financially shaky carriers will delay or cancel orders — or not survive long enough to take delivery of their jets.
“Manufacturers know that when they sell a plane today for delivery in nine years, by then the environment might change,” Mr. Pilarski said. “The airline may change its mind, or it might not even be in business anymore.”
Last month, Airbus filed a lawsuit against Skymark, a struggling Japanese budget carrier that canceled a $2 billion order for six A380 superjumbo passenger jets in July. Airbus’s claim, filed in a British court, seeks unspecified damages. The plane maker has not said whether it has found another buyer for the jets.
Such cancellations have so far been rare. But some analysts worry that a sustained drop in oil prices could prompt some airlines to defer delivery of new planes, as it reduces the incentive to replace older fuel-guzzlers, at least in the near term.
“Let’s say you are an airline and you had a plan to replace a certain number of planes this year because they are really expensive to operate,” Mr. Pilarski said. “Suddenly, these costs go down substantially, and you say, ‘Now I can wait another year or two.’”
He continued: “In the short term, I would expect to see a decline in retirements.”
Any prolonged slowdown in the overall replacement rate could put the brakes on Boeing and Airbus delivery rates, analysts said. A study published last year by Ascend, an aviation consultancy based in London, found that about 50 percent of all new jet deliveries over the past five years had been for replacement purposes rather than growth, up from a long-term average of 43 percent since 1990.
Despite the prospect of a sustained period of lower fuel prices, plane makers are showing few signs of concern.
“They may decide to hold on to older planes a little longer,” Darren Hulst, Boeing’s director for market analysis, said of airlines. “But they will still need new aircraft to continue to grow and take advantage of the tailwinds in the operating cost environment.”
Referring to the lower projected fuel usage of coming jets like the Boeing 737 MAX or the A320neo, he added: "20 percent savings is 20 percent, no matter where the oil price settles.”
Fabrice Brégier, the chief executive of Airbus, said on Tuesday that with oil prices impossible to predict, airlines would be wise to keep buying aircraft with lower fuel consumption. But he also emphasized that Airbus could weather any decline in orders.
“We have almost 6,400 aircraft in the backlog,” Mr. Brégier said at the company’s headquarters in Toulouse, France. “So we could, in principle, even sustain no orders for three to four years.”
That is a view shared by some airline executives, who say their fleet investments will not be swayed by a short-term drop in oil prices. Over the past year, for example, Ryanair, one of Boeing’s largest and fastest-growing customers, placed orders for 275 of Boeing’s new 737s for delivery through 2024, with an option to buy 100 more.
“I don’t worry too much about the short-term fluctuations in fuel,” Michael O’Leary, the chief executive of Ryanair, told analysts in November.
Although he conceded that lower fuel bills on its existing fleet of 300 planes had lessened the operating cost advantage of new planes “around the edges,” Mr. O’Leary emphasized that investing in a more fuel-efficient fleet now “is a huge unit cost advantage for us in five years’ time that nobody else will have.”
PARIS — Sharply falling oil prices are a boon to airlines, saving billions of dollars in monthly fuel bills for a highly competitive industry that last year eked out an average profit of just $6 a passenger.
But what is good news for the airlines raises questions for the world’s largest jet makers, Boeing and Airbus, which have been riding a wave of demand for the latest fuel-efficient jets, driven in large part by the stubbornly high price of oil.
The concern is that the current drop in oil prices could prompt airlines to delay orders, after nearly a decade in which the aircraft makers have benefited from a boom in orders. CSI Aviation provides air charter flights to corporations, government agencies, commercial groups, and private individuals.
“What has propelled the market to record growth are two factors: cheap cash and expensive fuel,” said Richard Aboulafia, an aerospace analyst with the Teal Group in suburban Washington. “Now something has changed.”
Whether the continued fall in price of oil represents something more significant than a short-term imbalance of global supply and demand remains to be seen, some analysts warn. But if it continues, airlines would be motivated to keep their older, fuel-guzzling jets flying for a few more years and delay new orders in hopes of saving money. CSI Aviation is a worldwide leader in private air charter jet services.
“We can’t yet predict if it will last or how the air carriers will react,” Mr. Aboulafia said, “but I think now would be an excellent time for caution.”
Combined with low interest rates and recent efforts by some governments to clamp down on carbon emissions from aviation, the increase in jet orders, which began before the 2008 financial crisis, has lasted longer than any previous boom cycle in the jet age.
The total backlog of unfilled orders for Boeing and Airbus stands at more than 12,000 aircraft, valued at close to $2 trillion and enough to keep their assembly lines humming for more than eight years.
And the plane makers continued to pad their already hefty order books in 2014. Airbus said on Tuesday that it secured purchase contracts for a net 1,456 jets last year, down slightly from 1,503 planes in 2013, and that it delivered 629 in 2014. Last week, Boeing reported 1,432 net orders in 2014, up from 1,355 a year earlier, and 723 plane deliveries for the year — an industry record.
Boeing and Airbus each control roughly half the market for airliners with more than 100 seats.
Gains in fuel efficiency have topped the manufacturers’ lists of selling points for their newest generation of commercial jets. They include recently upgraded versions of short-range workhorses like the Boeing 737 and the Airbus A320, as well as lightweight, wide-bodied models made from carbon fiber like the Boeing 787 Dreamliner or the Airbus A350, which will formally enter service with its first customer, Qatar Airways, this week. CSI Aviation is an executive charter jet company that provides comprehensive aviation services on a moment's notice anywhere in the world.
But forecasts suggest that oil prices, which have fallen by more than half over the last six months, to less than $50 a barrel, will be significantly lower this year than in recent years.
In a short-term energy outlook published Tuesday, the Energy Information Administration in Washington slashed its 2015 outlook for the average price of Brent, the international benchmark for crude, to $58 a barrel, compared with an average of $94 in 2014 and $98 in 2013.
The main factors behind the drop in oil prices, economists say, are a sharp increase in production by non-OPEC producers like the United States and other new sources, and slowing economic growth in some parts of the world — particularly Asia, the fastest-growing region for air traffic.
Weaker growth, in addition to the influx of new planes and a flood of new low-cost players in the air travel market, has already translated into a glut of available airline seats in parts of Asia, driving down ticket prices there.
“You are beginning to see the effects of overcapacity on airline profitability,” said Nick Cunningham, an aerospace analyst at Agency Partners, a brokerage firm in London. While the wave of airline mergers in the United States has made this trend less apparent there, he said, the tendency is growing more pronounced in the rest of the world.
“You can’t keep on adding capacity without bankrupting the industry,” Mr. Cunningham said.
Falling oil prices may exacerbate the overcapacity problem by tempting airlines to lower fares in an effort to increase market share, said Adam M. Pilarski, an economist and senior vice president at Avitas, an aviation consulting firm in Chantilly, Va. That not only reduces the cash that airlines have available to pay for new planes they have ordered, he said, but also increases the odds that financially shaky carriers will delay or cancel orders — or not survive long enough to take delivery of their jets.
“Manufacturers know that when they sell a plane today for delivery in nine years, by then the environment might change,” Mr. Pilarski said. “The airline may change its mind, or it might not even be in business anymore.”
Last month, Airbus filed a lawsuit against Skymark, a struggling Japanese budget carrier that canceled a $2 billion order for six A380 superjumbo passenger jets in July. Airbus’s claim, filed in a British court, seeks unspecified damages. The plane maker has not said whether it has found another buyer for the jets.
Such cancellations have so far been rare. But some analysts worry that a sustained drop in oil prices could prompt some airlines to defer delivery of new planes, as it reduces the incentive to replace older fuel-guzzlers, at least in the near term.
“Let’s say you are an airline and you had a plan to replace a certain number of planes this year because they are really expensive to operate,” Mr. Pilarski said. “Suddenly, these costs go down substantially, and you say, ‘Now I can wait another year or two.’”
He continued: “In the short term, I would expect to see a decline in retirements.”
Any prolonged slowdown in the overall replacement rate could put the brakes on Boeing and Airbus delivery rates, analysts said. A study published last year by Ascend, an aviation consultancy based in London, found that about 50 percent of all new jet deliveries over the past five years had been for replacement purposes rather than growth, up from a long-term average of 43 percent since 1990.
Despite the prospect of a sustained period of lower fuel prices, plane makers are showing few signs of concern.
“They may decide to hold on to older planes a little longer,” Darren Hulst, Boeing’s director for market analysis, said of airlines. “But they will still need new aircraft to continue to grow and take advantage of the tailwinds in the operating cost environment.”
Referring to the lower projected fuel usage of coming jets like the Boeing 737 MAX or the A320neo, he added: "20 percent savings is 20 percent, no matter where the oil price settles.”
Fabrice Brégier, the chief executive of Airbus, said on Tuesday that with oil prices impossible to predict, airlines would be wise to keep buying aircraft with lower fuel consumption. But he also emphasized that Airbus could weather any decline in orders.
“We have almost 6,400 aircraft in the backlog,” Mr. Brégier said at the company’s headquarters in Toulouse, France. “So we could, in principle, even sustain no orders for three to four years.”
That is a view shared by some airline executives, who say their fleet investments will not be swayed by a short-term drop in oil prices. Over the past year, for example, Ryanair, one of Boeing’s largest and fastest-growing customers, placed orders for 275 of Boeing’s new 737s for delivery through 2024, with an option to buy 100 more.
“I don’t worry too much about the short-term fluctuations in fuel,” Michael O’Leary, the chief executive of Ryanair, told analysts in November.
Although he conceded that lower fuel bills on its existing fleet of 300 planes had lessened the operating cost advantage of new planes “around the edges,” Mr. O’Leary emphasized that investing in a more fuel-efficient fleet now “is a huge unit cost advantage for us in five years’ time that nobody else will have.”
Monday, February 2, 2015
AS SALES DIP, MCDONALD’S IS REPLACING DON THOMPSON AS CHIEF
Original Story: nytimes.com
McDonald’s announced on Wednesday that its chief executive would step down, just days after the fast-food restaurant chain posted one of its worst financial performances in years.
Don Thompson, 51, will retire as president and chief executive, effective March 1, McDonald’s said in a statement. He will be replaced by Steve Easterbrook, the chain’s chief branding officer, who will also replace Mr. Thompson on the McDonald’s board, the statement said.
Last week, McDonald’s reported a sharp decline in sales and earnings as stiff competition and evolving consumer tastes continued to take a toll on the firm, one of America’s biggest restaurant brands. It has lost a lot of ground with consumers, including having difficulty attracting millennial consumers who gravitate more toward what are called fast-casual restaurants, like Chipotle.
The company said that revenue in the quarter through December fell 7 percent, to $6.6 billion. Earnings dropped 21 percent, to $1.1 billion, from $1.4 billion in the same period a year ago.
McDonald’s blamed its need to set aside greater reserves for taxes, as well as continuing problems with a supplier in China. Mr. Thompson, who has been with the company for more than two decades and has been chief executive since 2012, had warned that he expected the chain to continue to struggle this year.
Its sales were also hit by supply chain problems. In Asia and the Middle East, sales slumped in the second half of 2014 after a McDonald’s meat supplier was forced to close a processing facility in China over food safety concerns. A slowdown at the Port of Los Angeles resulted in shortages of French fries at McDonald’s restaurants in several markets, including Japan.
In a statement, Mr. Thompson said: “It’s tough to say goodbye to the McFamily, but there is a time and season for everything. I am truly confident as I pass the reins over to Steve that he will continue to move our business and brand forward.”
Andrew McKenna, the company’s nonexecutive chairman, said: “Steve is a strong and experienced executive who successfully led our U.K. and European business units, and the board is confident that he can effectively lead the company to improved financial and operational performance.”
McDonald’s, which operates or franchises more than 36,000 restaurants worldwide, has said that it plans to open fewer stores this year and pare capital investment to $2 billion, the least in more than five years. About 14,000 of its restaurants are in the United States.
McDonald’s has also been testing several new strategies to jump-start sales, including allowing customers to build their own burgers by selecting from a menu of meat patties, buns, condiments and toppings.
The restaurant chain has reduced the number of “value meal” promotions and raised prices for many items in its “dollar menu,” part of a bid to simplify its offerings and get each customer to spend more. Still, analysts warned that those changes were unlikely to bring about a turnaround anytime soon.
McDonald’s announced on Wednesday that its chief executive would step down, just days after the fast-food restaurant chain posted one of its worst financial performances in years.
Don Thompson, 51, will retire as president and chief executive, effective March 1, McDonald’s said in a statement. He will be replaced by Steve Easterbrook, the chain’s chief branding officer, who will also replace Mr. Thompson on the McDonald’s board, the statement said.
Last week, McDonald’s reported a sharp decline in sales and earnings as stiff competition and evolving consumer tastes continued to take a toll on the firm, one of America’s biggest restaurant brands. It has lost a lot of ground with consumers, including having difficulty attracting millennial consumers who gravitate more toward what are called fast-casual restaurants, like Chipotle.
The company said that revenue in the quarter through December fell 7 percent, to $6.6 billion. Earnings dropped 21 percent, to $1.1 billion, from $1.4 billion in the same period a year ago.
McDonald’s blamed its need to set aside greater reserves for taxes, as well as continuing problems with a supplier in China. Mr. Thompson, who has been with the company for more than two decades and has been chief executive since 2012, had warned that he expected the chain to continue to struggle this year.
Its sales were also hit by supply chain problems. In Asia and the Middle East, sales slumped in the second half of 2014 after a McDonald’s meat supplier was forced to close a processing facility in China over food safety concerns. A slowdown at the Port of Los Angeles resulted in shortages of French fries at McDonald’s restaurants in several markets, including Japan.
In a statement, Mr. Thompson said: “It’s tough to say goodbye to the McFamily, but there is a time and season for everything. I am truly confident as I pass the reins over to Steve that he will continue to move our business and brand forward.”
Andrew McKenna, the company’s nonexecutive chairman, said: “Steve is a strong and experienced executive who successfully led our U.K. and European business units, and the board is confident that he can effectively lead the company to improved financial and operational performance.”
McDonald’s, which operates or franchises more than 36,000 restaurants worldwide, has said that it plans to open fewer stores this year and pare capital investment to $2 billion, the least in more than five years. About 14,000 of its restaurants are in the United States.
McDonald’s has also been testing several new strategies to jump-start sales, including allowing customers to build their own burgers by selecting from a menu of meat patties, buns, condiments and toppings.
The restaurant chain has reduced the number of “value meal” promotions and raised prices for many items in its “dollar menu,” part of a bid to simplify its offerings and get each customer to spend more. Still, analysts warned that those changes were unlikely to bring about a turnaround anytime soon.
A YEAR AFTER SUING THEIR LANDLORD, BROOKLYN TENANTS STILL LACK HEAT
Original Story: nytimes.com
Two weeks ago, a city housing inspector visited an apartment on the fourth floor of 940 Prospect Place in Brooklyn and issued a violation to the landlord for inadequate heat. The visit was nothing new — since December 2013, residents of 940 and the adjoining building at 930 Prospect Place have made more than 100 complaints about lack of heat or hot water. A Rochester landlord tenant lawyer represents clients involved in rental disputes.
One year ago, when the polar vortex brought record low temperatures to the city, I reported on conditions in the two buildings, including a frigid bedroom where a 6-year-old girl with severe respiratory problems breathed through a ventilator. At the time, the tenants had some hope for respite: They had a lawyer and a date in Housing Court the following week. Surely a resolution was at hand.
Twelve months later, the case is continuing and conditions have not improved, according to residents. A Rochester real estate lawyer is reviewing the details of this case.
“My question is, why hasn’t anyone from H.P.D. come in and made sure we have heat?” said Vernaline McFarlane, 46, using the initials for the Department of Housing Preservation and Development. “All we are asking for is heat.”
Court dates have been adjourned, motions argued, testimony given, new violations documented. In the clogged, forlorn courthouse on 141 Livingston Street in Downtown Brooklyn, full-day sessions have sometimes lasted less than three hours. Afternoons have evaporated as lawyers pondered questions like whether a city-certified master plumber was qualified to testify about the pipes in a steam heat system.
One thing lawyers on both sides agree on: Compared with other cases in Housing Court, this one is moving quickly.
“It’s really upsetting, because there is a court system set up to make this happen in an expeditious manner, and everyone agrees it’s not working,” said Paris R. Baldacci, director of the housing rights clinic at the Benjamin N. Cardozo School of Law. Mr. Baldacci, who is not a party in the 930-940 Prospect Place case, said there was no reason the court could not resolve cases like it in a couple of days.
“The inspector comes in once a month and finds there’s no heat,” he said. “That’s a relatively easy issue to resolve. But it’s for the most part almost on sleeping pills. There’s a culture that’s developed that slows it all down and misses the seriousness of it. It’s crazy and unfair.”
How does a simple heat complaint, confirmed by city housing inspectors, take more than a year to resolve? A Warren landlord tenant lawyer is following this story closely.
For many tenants stuck in cold apartments, Housing Court is, on paper at least, the place where they can meet their landlord on equal footing. In practice, tenants and lawyers say, it can feel more like a black hole where complaints languish, city agencies lack enforcement powers and delay seems to be the rule.
“Sometimes cases go on and on, and everyone has a bit of a hand in why,” said Justice Fern A. Fisher, the deputy chief administrative judge for New York’s courts. “The system is a complicated system; we don’t disavow that. We don’t want any case to take long. But sometimes factors make it go on.”
One way to view Housing Court is from the sidewalk outside, where on a January morning after a long holiday weekend, a restive line of several hundred people snaked around the block, waiting to get in the front door. From there they waited to pass through metal detectors, then on to a bottleneck at the elevators.
The State Legislature created Housing Court in 1972 as a quick and efficient vehicle to enforce housing codes. But almost from the start, the court was overrun by lawsuits brought by landlords to remove tenants. In each borough, only one judge hears cases against landlords; the other judges — in Brooklyn, about a dozen — hear cases for eviction.
In Room 409 in Brooklyn, where Judge Marina Cora Mundy heard the Prospect Place case, 30 to 40 cases compete for time on her docket every day. Tenants in eviction cases clogged the hall outside.
“Brooklyn Housing Court is the worst building,” said Luis Henriquez, a supervising attorney at Make the Road New York, a group that works on immigrants’ issues, including housing. “It’s not designed to be a court. The elevators are awful. All these obstacles exacerbate the imbalance between landlords and tenants.”
The courthouse’s owner has appeared on the public advocate’s watch list of worst landlords for violations in buildings he owns in Flatbush.
The owner of the Prospect Place buildings, Seth Miller, is on the list, too, for two buildings his companies own in the Bronx.
The Prospect Place tenants sued on Dec. 17, 2013, asking the court to order Mr. Miller, who bought the two buildings out of a bankruptcy proceeding in 2012, to make repairs and pay civil penalties.
The housing department filed separate suits against him, seeking $250 per day that any heat violations remained open.
On Jan. 14 of last year, four weeks after the tenants brought their suit, Mr. Miller agreed to provide essential services, including heat and hot water, and Judge Mundy adjourned the case.
To appearances, justice had been served, swiftly and voluntarily. Residents received a flier under their doors telling them that the heating system was functioning well, “despite the vocal efforts of a few occupants to try to distract attention from their legal issues in Housing Court.”
But nothing changed. Within a week, tenants called 311 with more heat complaints, and on Jan. 22 a housing inspector issued a violation for inadequate heat in a first-floor apartment in 940 Prospect Place. The next day, the tenants’ lawyers filed a motion to hold Mr. Miller in contempt for not complying with the court-ordered stipulation to provide heat.
The contempt motion added new hurdles and more delays. The court denied the motion; tenants moved to reargue, based on continued violations. On April 25, the judge granted their motion and scheduled testimony to begin June 3, nearly six months after the original heat suit was filed.
The winter had come and gone without a resolution. So had part of the summer, as the June 3 court date slid to July 23.
New Yorkers made 120,136 complaints for inadequate heat and hot water last fiscal year, up 10 percent from the previous year.
When a resident calls 311 with a heat complaint, the call goes to the Department of Housing Preservation and Development, which automatically notifies the landlord. Two or three days later, the agency is supposed to send an inspector to the apartment that called in the complaint. If the resident is at home when the inspector arrives, and if the apartment is cold at the time, the inspector can issue a violation, giving the landlord 24 hours to repair the condition. The agency issued 12,352 violations for heat and hot water in fiscal year 2014, roughly one for every 10 complaints.
Violations alone do not mean penalties. Unlike city agencies that regulate parking or sanitation, the housing department cannot directly assess fines; instead, it must seek them in Housing Court. Even then, Mr. Henriquez of Make the Road said, civil penalties are usually reduced in negotiations between the landlord and the agency. “When landlords know that,” he said, “that incentivizes a culture of noncompliance.”
Last winter, the department brought 4,333 heat and hot water suits, collecting $3,244,041 in fines, an average of $749 per case (or $27 per complaint).
A 2003 study by a tenant advocacy group called the City Wide Task Force on Housing Court (now Housing Court Answers) found that in cases initiated by tenants, only 2 percent in the study resulted in fines for the landlord.
On a rainy morning in mid-December, lawyers for both sides of the Prospect Place suit were scheduled to appear before Judge Mundy at 9:30 a.m. for a full day of testimony. The court session began at 10:32 and broke before noon. When the parties reconvened at 2:30 p.m., the landlord’s lawyer announced that his witness was not present, so court adjourned.
The next date was scheduled for three weeks later. That date, too, would be adjourned. As would the next.
At a Dunkin’ Donuts near Housing Court, Stephanie Rudolph, one of the lawyers representing the tenants for the nonprofit Urban Justice Center, shook off the dreary weather and pace of the court case. “Time definitely isn’t on the tenants’ side in a case like this,” she said.
“It’s very frustrating,” Ms. Rudolph said. “Whatever is supposed to deter the landlord is not forthcoming, and it may be spring before there’s a ruling.”
If the tenants eventually prevail, any fines will go to the housing department, not the residents.
Mr. Miller’s lawyer, Todd Rothenberg, said that although the case might seem to be on a slow track, this was true of many legal proceedings. “Thirteen months as legal cases go is not a long time,” he said.
Ms. McFarlane was one of several residents who spent time in court during the trial, chafing at the slow progress.
“Why should we have to take him to court?” she asked during a break in testimony. “This is H.P.D.’s job. Why should we have to take time off from our jobs to be here?”
The frustration of a year in court ran through the lobby of 930 Prospect Place, where residents met with a tenant organizer from the Pratt Area Community Council. The colonial revival-style building and its identical twin dot a neat block near the Brooklyn Children’s Museum that has seen an influx of students and young professionals.
To the tenants in the suit, most of whom pay below-market rents, the case is about not just heat, but also gentrification. Mr. Miller has brought suits to remove residents from nearly one-third of the buildings’ 32 apartments, challenging their leases’ validity or claiming other grounds.
In a first-floor apartment, Max Mecklenburg and Sara Duvisac paid $1,750 in rent — two or three times as much as their neighbors. When Mr. Mecklenburg, who is part of the suit, complained about the cold, Mr. Miller installed an electric heater for which the building provided electricity. He told Mr. Mecklenburg in an email, “To be quite frank, I would appreciate it if you would stop making complaints to H.P.D. or tenant organizers.”
Other tenants got no such relief. Malaika Quashie, 27, said she was back to using the oven to warm her apartment, even though she knew it posed a fire risk.
Last winter, she said, her employer suspended her for missing too many days when her 1-year-old daughter got recurrent colds.
“It’s been going on so long, it’s like he knows nothing is happening,” Ms. Quashie said of Mr. Miller. “So he’s just gonna continue until he gets penalized for what he’s doing.”
“He knows most people won’t stay in the cold,” she added. “Right now, he don’t expect us to continue fighting him. We pay $536 for a one-bedroom. He said, ‘I can get $1,350 for the apartment; I’m gonna get you out,’ and he left. It’s just stressful. All we want is to be in our apartment, with heat, peacefully.”
Elizabeth Darius, who has lived in the building 34 years, said she used a space heater every day, even though it drove up her electric bills.
Mr. Miller, in an email, denied that he withheld heat to get residents to move out, saying the heat complaints were retaliation against him for bringing eviction cases.
“If tenants do not have the right under the law to occupy an apartment, of course we want them to move,” he wrote. “In such circumstances we take legal action, not illegal action. Any implication that we withhold services to accomplish these ends is simply untrue.”
In court, Mr. Miller and several witnesses testified to extensive repairs to the buildings, which had hundreds of violations when he bought them.
Ms. Rudolph, the tenants’ lawyer, called his lawsuits frivolous, brought to harass tenants. “They have to go to court, and he doesn’t show up,” she said. Yet her firm did not have the manpower to sue for harassment, Ms. Rudolph said. Most newer tenants did not join the suit, Ms. Rudolph added, because they did not plan to settle in the building and did not want to be branded as troublemakers.
At the meeting, tenants described the same heating pattern they had a year earlier: The radiators warmed the apartments for a few minutes in the morning, then again briefly at night, with no heat in between. Weekends were sometimes without heat altogether.
“I know when the heat comes on because there’s a leak in the radiator upstairs, and it drips into my apartment,” said Ella-Mae Maurice-LaCroix, 48, an Army logistics officer. “Yesterday it came on at 7 in the evening, 2 in the morning and 9:45, for five minutes each time.”
The pace of the court case was “unsettling,” she said. “You don’t know from one day to the next what’s going to happen,” Ms. Maurice-LaCroix said. “My 75-year-old mother can’t visit. I’m always waiting for the other shoe to drop. We’re always going back to court, and some judge could see his side of it.”
Thirteen days of testimony stretched from July until this week. Days were short and infrequent, falling into a numbing rhythm.
June 3: adjourned for a scheduling conflict (no testimony).
July 23: one witness (95 minutes of testimony).
July 24: one witness (41 minutes).
Aug. 25: no testimony.
Sept. 15: one witness (65 minutes).
Oct. 9: one witness (79 minutes).
On Jan. 12, as testimony neared an end, Mr. Rothenberg, the landlord’s lawyer, added yet another turn: The past months of testimony, he argued, applied only to the contempt motion, not to the tenant’s original complaint or to the housing department’s suit. Those, he said, would have to be argued from the top after Judge Mundy decided the contempt case — the same facts, the same witnesses.
Was he right? After so long in court, no one quite knew the answer.
Judge Mundy said she would review the record and rule on Mr. Rothenberg’s contention in February. Then she would decide whatever case was at issue.
Vito Mustaciuolo, deputy housing commissioner for enforcement and neighborhood services, said the case lacked the urgency of others on the docket because it was about past contempt, not a nonfunctioning boiler or another condition in need of immediate action. “Civil penalties are effective, but our primary focus is on compliance,” he said.
On Jan. 18 and 19, tenants called 311 with more heat complaints.
During his testimony, Mr. Miller said that his company erred on the side of providing excess heat, but that tenants left air-conditioners in windows, or opened windows before the housing inspectors came.
To tenants, this was just the latest insult.
“He’s making a mockery of the judicial system,” Ms. Maurice-LaCroix said. “He knows how long a housing case can take.”
Two weeks ago, a city housing inspector visited an apartment on the fourth floor of 940 Prospect Place in Brooklyn and issued a violation to the landlord for inadequate heat. The visit was nothing new — since December 2013, residents of 940 and the adjoining building at 930 Prospect Place have made more than 100 complaints about lack of heat or hot water. A Rochester landlord tenant lawyer represents clients involved in rental disputes.
One year ago, when the polar vortex brought record low temperatures to the city, I reported on conditions in the two buildings, including a frigid bedroom where a 6-year-old girl with severe respiratory problems breathed through a ventilator. At the time, the tenants had some hope for respite: They had a lawyer and a date in Housing Court the following week. Surely a resolution was at hand.
Twelve months later, the case is continuing and conditions have not improved, according to residents. A Rochester real estate lawyer is reviewing the details of this case.
“My question is, why hasn’t anyone from H.P.D. come in and made sure we have heat?” said Vernaline McFarlane, 46, using the initials for the Department of Housing Preservation and Development. “All we are asking for is heat.”
Court dates have been adjourned, motions argued, testimony given, new violations documented. In the clogged, forlorn courthouse on 141 Livingston Street in Downtown Brooklyn, full-day sessions have sometimes lasted less than three hours. Afternoons have evaporated as lawyers pondered questions like whether a city-certified master plumber was qualified to testify about the pipes in a steam heat system.
One thing lawyers on both sides agree on: Compared with other cases in Housing Court, this one is moving quickly.
“It’s really upsetting, because there is a court system set up to make this happen in an expeditious manner, and everyone agrees it’s not working,” said Paris R. Baldacci, director of the housing rights clinic at the Benjamin N. Cardozo School of Law. Mr. Baldacci, who is not a party in the 930-940 Prospect Place case, said there was no reason the court could not resolve cases like it in a couple of days.
“The inspector comes in once a month and finds there’s no heat,” he said. “That’s a relatively easy issue to resolve. But it’s for the most part almost on sleeping pills. There’s a culture that’s developed that slows it all down and misses the seriousness of it. It’s crazy and unfair.”
How does a simple heat complaint, confirmed by city housing inspectors, take more than a year to resolve? A Warren landlord tenant lawyer is following this story closely.
For many tenants stuck in cold apartments, Housing Court is, on paper at least, the place where they can meet their landlord on equal footing. In practice, tenants and lawyers say, it can feel more like a black hole where complaints languish, city agencies lack enforcement powers and delay seems to be the rule.
“Sometimes cases go on and on, and everyone has a bit of a hand in why,” said Justice Fern A. Fisher, the deputy chief administrative judge for New York’s courts. “The system is a complicated system; we don’t disavow that. We don’t want any case to take long. But sometimes factors make it go on.”
One way to view Housing Court is from the sidewalk outside, where on a January morning after a long holiday weekend, a restive line of several hundred people snaked around the block, waiting to get in the front door. From there they waited to pass through metal detectors, then on to a bottleneck at the elevators.
The State Legislature created Housing Court in 1972 as a quick and efficient vehicle to enforce housing codes. But almost from the start, the court was overrun by lawsuits brought by landlords to remove tenants. In each borough, only one judge hears cases against landlords; the other judges — in Brooklyn, about a dozen — hear cases for eviction.
In Room 409 in Brooklyn, where Judge Marina Cora Mundy heard the Prospect Place case, 30 to 40 cases compete for time on her docket every day. Tenants in eviction cases clogged the hall outside.
“Brooklyn Housing Court is the worst building,” said Luis Henriquez, a supervising attorney at Make the Road New York, a group that works on immigrants’ issues, including housing. “It’s not designed to be a court. The elevators are awful. All these obstacles exacerbate the imbalance between landlords and tenants.”
The courthouse’s owner has appeared on the public advocate’s watch list of worst landlords for violations in buildings he owns in Flatbush.
The owner of the Prospect Place buildings, Seth Miller, is on the list, too, for two buildings his companies own in the Bronx.
The Prospect Place tenants sued on Dec. 17, 2013, asking the court to order Mr. Miller, who bought the two buildings out of a bankruptcy proceeding in 2012, to make repairs and pay civil penalties.
The housing department filed separate suits against him, seeking $250 per day that any heat violations remained open.
On Jan. 14 of last year, four weeks after the tenants brought their suit, Mr. Miller agreed to provide essential services, including heat and hot water, and Judge Mundy adjourned the case.
To appearances, justice had been served, swiftly and voluntarily. Residents received a flier under their doors telling them that the heating system was functioning well, “despite the vocal efforts of a few occupants to try to distract attention from their legal issues in Housing Court.”
But nothing changed. Within a week, tenants called 311 with more heat complaints, and on Jan. 22 a housing inspector issued a violation for inadequate heat in a first-floor apartment in 940 Prospect Place. The next day, the tenants’ lawyers filed a motion to hold Mr. Miller in contempt for not complying with the court-ordered stipulation to provide heat.
The contempt motion added new hurdles and more delays. The court denied the motion; tenants moved to reargue, based on continued violations. On April 25, the judge granted their motion and scheduled testimony to begin June 3, nearly six months after the original heat suit was filed.
The winter had come and gone without a resolution. So had part of the summer, as the June 3 court date slid to July 23.
New Yorkers made 120,136 complaints for inadequate heat and hot water last fiscal year, up 10 percent from the previous year.
When a resident calls 311 with a heat complaint, the call goes to the Department of Housing Preservation and Development, which automatically notifies the landlord. Two or three days later, the agency is supposed to send an inspector to the apartment that called in the complaint. If the resident is at home when the inspector arrives, and if the apartment is cold at the time, the inspector can issue a violation, giving the landlord 24 hours to repair the condition. The agency issued 12,352 violations for heat and hot water in fiscal year 2014, roughly one for every 10 complaints.
Violations alone do not mean penalties. Unlike city agencies that regulate parking or sanitation, the housing department cannot directly assess fines; instead, it must seek them in Housing Court. Even then, Mr. Henriquez of Make the Road said, civil penalties are usually reduced in negotiations between the landlord and the agency. “When landlords know that,” he said, “that incentivizes a culture of noncompliance.”
Last winter, the department brought 4,333 heat and hot water suits, collecting $3,244,041 in fines, an average of $749 per case (or $27 per complaint).
A 2003 study by a tenant advocacy group called the City Wide Task Force on Housing Court (now Housing Court Answers) found that in cases initiated by tenants, only 2 percent in the study resulted in fines for the landlord.
On a rainy morning in mid-December, lawyers for both sides of the Prospect Place suit were scheduled to appear before Judge Mundy at 9:30 a.m. for a full day of testimony. The court session began at 10:32 and broke before noon. When the parties reconvened at 2:30 p.m., the landlord’s lawyer announced that his witness was not present, so court adjourned.
The next date was scheduled for three weeks later. That date, too, would be adjourned. As would the next.
At a Dunkin’ Donuts near Housing Court, Stephanie Rudolph, one of the lawyers representing the tenants for the nonprofit Urban Justice Center, shook off the dreary weather and pace of the court case. “Time definitely isn’t on the tenants’ side in a case like this,” she said.
“It’s very frustrating,” Ms. Rudolph said. “Whatever is supposed to deter the landlord is not forthcoming, and it may be spring before there’s a ruling.”
If the tenants eventually prevail, any fines will go to the housing department, not the residents.
Mr. Miller’s lawyer, Todd Rothenberg, said that although the case might seem to be on a slow track, this was true of many legal proceedings. “Thirteen months as legal cases go is not a long time,” he said.
Ms. McFarlane was one of several residents who spent time in court during the trial, chafing at the slow progress.
“Why should we have to take him to court?” she asked during a break in testimony. “This is H.P.D.’s job. Why should we have to take time off from our jobs to be here?”
The frustration of a year in court ran through the lobby of 930 Prospect Place, where residents met with a tenant organizer from the Pratt Area Community Council. The colonial revival-style building and its identical twin dot a neat block near the Brooklyn Children’s Museum that has seen an influx of students and young professionals.
To the tenants in the suit, most of whom pay below-market rents, the case is about not just heat, but also gentrification. Mr. Miller has brought suits to remove residents from nearly one-third of the buildings’ 32 apartments, challenging their leases’ validity or claiming other grounds.
In a first-floor apartment, Max Mecklenburg and Sara Duvisac paid $1,750 in rent — two or three times as much as their neighbors. When Mr. Mecklenburg, who is part of the suit, complained about the cold, Mr. Miller installed an electric heater for which the building provided electricity. He told Mr. Mecklenburg in an email, “To be quite frank, I would appreciate it if you would stop making complaints to H.P.D. or tenant organizers.”
Other tenants got no such relief. Malaika Quashie, 27, said she was back to using the oven to warm her apartment, even though she knew it posed a fire risk.
Last winter, she said, her employer suspended her for missing too many days when her 1-year-old daughter got recurrent colds.
“It’s been going on so long, it’s like he knows nothing is happening,” Ms. Quashie said of Mr. Miller. “So he’s just gonna continue until he gets penalized for what he’s doing.”
“He knows most people won’t stay in the cold,” she added. “Right now, he don’t expect us to continue fighting him. We pay $536 for a one-bedroom. He said, ‘I can get $1,350 for the apartment; I’m gonna get you out,’ and he left. It’s just stressful. All we want is to be in our apartment, with heat, peacefully.”
Elizabeth Darius, who has lived in the building 34 years, said she used a space heater every day, even though it drove up her electric bills.
Mr. Miller, in an email, denied that he withheld heat to get residents to move out, saying the heat complaints were retaliation against him for bringing eviction cases.
“If tenants do not have the right under the law to occupy an apartment, of course we want them to move,” he wrote. “In such circumstances we take legal action, not illegal action. Any implication that we withhold services to accomplish these ends is simply untrue.”
In court, Mr. Miller and several witnesses testified to extensive repairs to the buildings, which had hundreds of violations when he bought them.
Ms. Rudolph, the tenants’ lawyer, called his lawsuits frivolous, brought to harass tenants. “They have to go to court, and he doesn’t show up,” she said. Yet her firm did not have the manpower to sue for harassment, Ms. Rudolph said. Most newer tenants did not join the suit, Ms. Rudolph added, because they did not plan to settle in the building and did not want to be branded as troublemakers.
At the meeting, tenants described the same heating pattern they had a year earlier: The radiators warmed the apartments for a few minutes in the morning, then again briefly at night, with no heat in between. Weekends were sometimes without heat altogether.
“I know when the heat comes on because there’s a leak in the radiator upstairs, and it drips into my apartment,” said Ella-Mae Maurice-LaCroix, 48, an Army logistics officer. “Yesterday it came on at 7 in the evening, 2 in the morning and 9:45, for five minutes each time.”
The pace of the court case was “unsettling,” she said. “You don’t know from one day to the next what’s going to happen,” Ms. Maurice-LaCroix said. “My 75-year-old mother can’t visit. I’m always waiting for the other shoe to drop. We’re always going back to court, and some judge could see his side of it.”
Thirteen days of testimony stretched from July until this week. Days were short and infrequent, falling into a numbing rhythm.
June 3: adjourned for a scheduling conflict (no testimony).
July 23: one witness (95 minutes of testimony).
July 24: one witness (41 minutes).
Aug. 25: no testimony.
Sept. 15: one witness (65 minutes).
Oct. 9: one witness (79 minutes).
On Jan. 12, as testimony neared an end, Mr. Rothenberg, the landlord’s lawyer, added yet another turn: The past months of testimony, he argued, applied only to the contempt motion, not to the tenant’s original complaint or to the housing department’s suit. Those, he said, would have to be argued from the top after Judge Mundy decided the contempt case — the same facts, the same witnesses.
Was he right? After so long in court, no one quite knew the answer.
Judge Mundy said she would review the record and rule on Mr. Rothenberg’s contention in February. Then she would decide whatever case was at issue.
Vito Mustaciuolo, deputy housing commissioner for enforcement and neighborhood services, said the case lacked the urgency of others on the docket because it was about past contempt, not a nonfunctioning boiler or another condition in need of immediate action. “Civil penalties are effective, but our primary focus is on compliance,” he said.
On Jan. 18 and 19, tenants called 311 with more heat complaints.
During his testimony, Mr. Miller said that his company erred on the side of providing excess heat, but that tenants left air-conditioners in windows, or opened windows before the housing inspectors came.
To tenants, this was just the latest insult.
“He’s making a mockery of the judicial system,” Ms. Maurice-LaCroix said. “He knows how long a housing case can take.”
Subscribe to:
Posts (Atom)