Conn. hedge fund loses billions
The $4.6-billion loss by Amaranth Advisors may spark activity by Congress or regulators.
Thursday, September 21, 2006
BY KATHERINE BURTON and MATTHEW LEISING
Amaranth Advisors LLC, the Greenwich, Conn.-based hedge fund whose wrong-way bets lost about $4.6 billion this month, reached an agreement yesterday to transfer all of its energy trades to an unidentified third party, according to a letter sent to investors.
Nicholas Maounis, Amaranth's founder, said in his letter, a copy of which was obtained by Bloomberg News, that more details will follow "shortly." The firm was in negotiations with Citadel Investment Group LLC as of late yesterday, two people with knowledge of those talks said.
Amaranth was forced to unload the trades after swings in natural-gas prices last week turned it into the biggest hedge fund meltdown since Long-Term Capital Management LP's 1998 collapse. By transferring the bets, Amaranth would stem its losses and the new investor would be at risk of any further declines in the gas market.
Also yesterday, 3M Co., Goldman Sachs Group Inc. and San Diego County's retirement fund say the meltdown of Amaranth may cost them millions.
The $9.2-billion pension fund of 3M, maker of Post-it Notes and electronics and cleaning products, gave less than $92 million to Amaranth, according to Jacqueline Berry, a spokeswoman for the St. Paul, Minn.-based company. Goldman Sachs Hedge Fund Partners LLC has about $13 million with the firm, according to a regulatory filing.
"This will spark activity by Congress, or by regulators, for some oversight of an area that has not been watched," said Dan McAllister, a board member of the $7.2-billion San Diego County Employees Retirement Association. The fund invested $175 million with Amaranth last year.
The San Diego County pension board invested in Amaranth on the recommendation of consultants Rocaton Investment Advisors in Norwalk, Conn., McAllister said. The San Diego County fund is unconnected to the San Diego City Employees' Retirement System, which has a deficit of more than $1 billion.
"We are aware of the Amaranth situation, and we are in dialogue with our clients," Rocaton spokesman Todd Miller said, declining further comment.
It will take weeks to find out how much pension money melted away with Amaranth's bad trades, Damon Silvers, associate general counsel of the Washington-based AFL-CIO, said.
The largest U.S. labor association, whose member unions hold more than $400 billion in pension assets, has criticized provisions of the pension-reform law signed by President Bush last month that loosened restrictions on pension-money flows into hedge funds.
"This shows what an appalling decision that was," Silvers said.
Connecticut Attorney General Richard Blumenthal said he's examining Amaranth's losses.
"We are taking some initial steps to investigate what went so terribly wrong, whether there was a truthful and accurate disclosure to investors," he said.
Tom Carson, a spokesman for U.S. Attorney Kevin O'Connor in Connecticut, declined to comment, as did Bryan Sierra, a spokesman for the Justice Department in Washington and SEC spokesman John Nester.
Amaranth, named for an imaginary flower that never fades, had gained more than 25 percent earlier this year on bets that natural-gas prices would rise. Prices tumbled this month, triggering losses that grew as it scrambled to unwind trades.
"Potentially, [the new investors] bought at a very good price," said Mark Williams, a finance professor at Boston University and former risk manager of electricity trader Citizens Power. "If they have a longer time horizon and they can withstand the volatility and the short-term fluctuations, they then have a good chance of making some serious cash."
Amaranth spokesman Shawn Pattison declined to comment. A call to Scott Rafferty, managing director at Citadel, wasn't immediately returned.
Some of Amaranth's energy investments consist of positions in gas futures, options and over-the-counter contracts that would gain in value as prices rise, according to one person with knowledge of the situation.
Amaranth, which made so-called spread trades that aim to profit from price discrepancies among different contracts, was at least the second hedge fund to be rocked by bad investments in natural gas. MotherRock LP, a $400-million fund run by former New York Mercantile Exchange President Robert "Bo" Collins, closed last month.
"It's certainly a reminder that investing in certain hedge funds is a risky business," Securities and Exchange Commission Chairman Christopher Cox said yesterday. "It's not for mom and pop."
So-called funds of funds that invested with Amaranth may bear much of its losses. Goldman Sachs Dynamic Opportunities Ltd., a London-based fund, reported that it sustained losses on an investment whose description fits Amaranth.
Morgan Stanley, Credit Suisse Group, Bank of New York Co., Deutsche Bank AG and Man Group PLC all run funds of funds that had investments in Amaranth as of June 30.
Amaranth was founded by Maounis, a University of Connecticut finance graduate. After working at Greenwich-based Paloma Partners for 10 years, Maounis, 43, left to found Amaranth with 27 employees and $450 million in 2000.
The firm occupies a beige, four-story office next to a pond and manicured lawn with a fountain in Greenwich, home to more than 100 hedge funds, private pools of capital that allow managers to participate substantially in the gains on clients' investments. The building houses a gym and a game room, with pool tables for employees.
After starting in convertible-bond trades and betting on stocks of merging companies, Maounis expanded into energy, hiring former Deutsche Bank trader Brian Hunter. As of June 30, energy trades accounted for about half of the capital in Amaranth's funds and generated about 75 percent of its profit.
Earlier this month, Amaranth bought a portfolio of gas trades from Amsterdam-based ABN Amro Holding NV, which itself had taken them over from MotherRock. It was Hunter, 32, who orchestrated the bets that triggered Amaranth's losses.
"If one is speculating in that kind of market, there's going to be some downside risk," said Shannon Burchett, who traded oil for JPMorgan Chase & Co. and Citigroup Inc. in the 1990s and now runs an energy consulting firm in Dallas. "They should have the controls and risk management strategies in place to mitigate those kind of outcomes."
AP photographer held by U.S. military for months without chargeNew York, September 17, 2006
What was AP doing for the last five months?
US Senator John McCain knows what it is to be detained and tortured by the 'captors'. He has been fighting a battle within the ruling Republican regime in the US. I urge all readers to email senator McCain asking him to voice his support for the immediate release or charge of Bilal Hussein.
Click on the picture below to view the Pulitzer winning photo-series. The photos do capture the dreadful nature of war and violence. There is a picture of a 18-month-old boy's body in a coffin, if it doesn't break your heart - you ain't got one. How could Iraqis or Americans support this mindless violence.
(Photo by Bilal Hussein, November 8, 2004.)
Fallujah - Iraqi insurgents fire a mortar and small arms during the U.S.-led offensive against insurgents in the city.
How Bilal found himself in the desert with the insurgents 'killing' the Italian could be one of the reasons why the Americans have taken Bilal into their custody. But not to charge the man for six months is illegal.
Insurgents stand next to a body they claim to be that of Italian national Salvatore Santoro, 52, in the desert outside Ramadi, Iraq, Wednesday Dec. 15, 2004. The statement by the group identifying itself as the Islamic Movement of Iraq's Mujahedeen said it was announcing the killing of an Italian citizen. (AP Photo/Bilal Hussein)
AP chief calls on U.S. either to charge or release photographerBy The Associated Press
The U.S. military in Iraq has imprisoned an Associated Press photographer for five months, accusing him of being a security threat but never filing charges or permitting a public hearing.
Military officials said Bilal Hussein, an Iraqi citizen, was being held for "imperative reasons of security" under United Nations resolutions. AP executives said the news cooperative's review of Hussein's work did not find anything to indicate inappropriate contact with insurgents, and any evidence against him should be brought to the Iraqi criminal justice system.
Hussein, 35, is a native of Fallujah who began work for the AP in September 2004. He photographed events in Fallujah and Ramadi until he was detained on April 12 of this year.
"We want the rule of law to prevail. He either needs to be charged or released. Indefinite detention is not acceptable," said Tom Curley, AP's president and chief executive officer. "We've come to the conclusion that this is unacceptable under Iraqi law, or Geneva Conventions, or any military procedure."
Hussein is one of an estimated 14,000 people detained by the U.S. military worldwide — 13,000 of them in Iraq. They are held in limbo where few have been charged with a specific crime or given a chance before any court or tribunal to argue for their freedom.
In Hussein's case, the military has not provided any concrete evidence to back up the vague allegations they have raised about him, Curley and other AP executives said.
The military said Hussein was captured with two insurgents, including Hamid Hamad Motib, an alleged leader of al-Qaida in Iraq. "He has close relationships with persons known to be responsible for kidnappings, smuggling, improvised explosive device (IED) attacks and other attacks on coalition forces," according to a May 7 e-mail from U.S. Army Maj. Gen. Jack Gardner, who oversees all coalition detainees in Iraq.
"The information available establishes that he has relationships with insurgents and is afforded access to insurgent activities outside the normal scope afforded to journalists conducting legitimate activities," Gardner wrote to AP International Editor John Daniszewski.
Hussein proclaims his innocence, according to his Iraqi lawyer, Badie Arief Izzat, and believes he has been unfairly targeted because his photos from Ramadi and Fallujah were deemed unwelcome by the coalition forces.
That Hussein was captured at the same time as insurgents doesn't make him one of them, said Kathleen Carroll, AP's executive editor.
"Journalists have always had relationships with people that others might find unsavory," she said. "We're not in this to choose sides, we're to report what's going on from all sides."
AP executives in New York and Baghdad have sought to persuade U.S. officials to provide additional information about allegations against Hussein and to have his case transferred to the Iraqi criminal justice system. The AP contacted military leaders in Iraq and the Pentagon, and later the U.S. ambassador to Iraq, Zalmay Khalilzad.
The AP has worked quietly until now, believing that would be the best approach. But with the U.S. military giving no indication it would change its stance, the news cooperative has decided to make public Hussein's imprisonment, hoping the spotlight will bring attention to his case and that of thousands of others now held in Iraq, Curley said.
One of Hussein's photos was part of a package of 20 photographs that won a Pulitzer Prize for breaking news photography last year. His contribution was an image of four insurgents in Fallujah firing a mortar and small arms during the U.S.-led offensive in the city in November 2004.
How Hussein came to work for AP
In what several AP editors described as a typical path for locally hired staff in the midst of a conflict, Hussein, a shopkeeper who sold cell phones and computers in Fallujah, was hired in the city as a general helper because of his local knowledge.
As the situation in Fallujah eroded in 2004, he expressed a desire to become a photographer. Hussein was given training and camera equipment and hired in September of that year as a freelancer, paid on a per-picture basis, according to Santiago Lyon, AP's director of photography. A month later, he was put on a monthly retainer.
During the U.S.-led offensive in Fallujah in November 2004, he stayed on after his family fled. "He had good access. He was able to photograph not only the results of the attacks on Fallujah, he was also able to photograph members of the insurgency on occasion," Lyon said. "That was very difficult to achieve at that time."
After fleeing later in the offensive, leaving his camera behind in the rush to escape, Hussein arrived in Baghdad, where the AP gave him a new camera. He then went to work in Ramadi which, like Fallujah, has been a center of insurgent violence.
In its own effort to determine whether Hussein had gotten too close the insurgency, the AP has reviewed his work record, interviewed senior photo editors who worked on his images and examined all 420 photographs in the news cooperative's archives that were taken by Hussein, Lyon said.
The military in Iraq has frequently detained journalists who arrive quickly at scenes of violence, accusing them of getting advance notice from insurgents, Lyon said. But "that's just good journalism. Getting to the event quickly is something that characterizes good journalism anywhere in the world. It does not indicate prior knowledge," he said.
Out of Hussein's body of work, only 37 photos show insurgents or people who could be insurgents, Lyon said. "The vast majority of the 420 images show the aftermath or the results of the conflict — blown up houses, wounded people, dead people, street scenes," he said.
Only four photos show the wreckage of still-burning U.S. military vehicles.
AP says it checks work for signs of bias
"Do we know absolutely everything about him, and what he did before he joined us? No. Are we satisfied that what he did since he joined us was appropriate for the level of work we expected from him? Yes," Lyon said. "When we reviewed the work he submitted to us, we found it appropriate to what we'd asked him to do."
The AP does not knowingly hire combatants or anyone who is part of a story, company executives said. But hiring competent local staff in combat areas is vital to the news service, because often only local people can pick their way around the streets with a reasonable degree of safety.
"We want people who are not part of a story. Sometimes it is a judgment call. If someone seems to be thuggish, or like a fighter, you certainly wouldn't hire them," Daniszewski said. After they are hired, their work is checked carefully for signs of bias.
Lyon said every image from local photographers was always "thoroughly checked and vetted" by experienced editors. "In every case where there have been images of insurgents, questions have been asked about circumstances under which the image was taken, and what the image shows," he said.
Executives said it's not uncommon for AP news people to be picked up by coalition forces and detained for hours, days or occasionally weeks, but never this long. Several hundred journalists in Iraq have been detained, some briefly and some for several weeks, according to Scott Horton, a New York-based lawyer hired by the AP to work on Hussein's case.
Horton also worked on behalf of an Iraqi cameraman employed by CBS, Abdul Ameer Younis Hussein, who was detained for one year before his case was sent to an Iraqi court on charges of insurgent activity. He was acquitted for lack of evidence.
AP officials emphasized the military had not provided the company concrete evidence of its claims against Bilal Hussein, or provided him a chance to offer a defense.
"He's a Sunni Arab from a tribe in that area. I'm sure he does know some nasty people. But is he a participant in the insurgency? I don't think that's been proven," Daniszewski said.
Accusations of kidnapping refuted
Information provided to the AP by the military to support the continued detention hasn't withstood scrutiny, when it could be checked, Daniszewski said.
For example, he said, the AP had been told that Hussein was involved with the kidnapping of two Arab journalists in Ramadi.
But those journalists, tracked down by the AP, said Hussein had helped them after they were released by their captors without money or a vehicle in a dangerous part of Ramadi. After a journalist acquaintance put them in touch with Hussein, the photographer picked them up, gave them shelter and helped get them out of town, they said.
The journalists said they had never been contacted by multinational forces for their account.
Horton said the military has provided contradictory accounts of whether Hussein himself was a U.S. target last April or if he was caught up in a broader sweep.
The military said bomb-making materials were found in the apartment where Hussein was captured but it never detailed what those materials were. The military said he tested positive for traces of explosives. Horton said that was virtually guaranteed for anyone on the streets of Ramadi at that time.
Hussein has been a frequent target of conservative critics on the Internet, who raised questions about his images months before the military detained him. One blogger and author, Michelle Malkin, wrote about Hussein's detention on the day of his arrest, saying she'd been tipped by a military source.
Carroll said the role of journalists can be misconstrued and make them a target of critics. But that criticism is misplaced, she said.
"How can you know what a conflict is like if you're only with one side of the combatants?" she said. "Journalism doesn't work if we don't report and photograph all sides."
After reading this report, you would start to wonder whether ICC is an administrative body or a club of a bunch of jokers.
Ponting hit by fine for dissent
The Aussie skipper pleaded guilty at a hearing led by match ref Chris Broad.
Broad said: "It is not acceptable for any player, let alone a captain, to question an umpire's decision."
It was Ponting's second dissent offence within the past year - the other was in April against Bangladesh during the second Test at Chittagong. The latest charge followed his reaction to the calling of a wide by umpire Asad Rauf in the 33rd over of West Indies' innings. Ponting walked up to Rauf to query the decision.
A captain should be allowed to speak to the umpire. If Ponting insulted the umpire - then yes, by all means don't fine him, suspend him.
International Cricket is played by adults who are eligible to vote, perform a surgery, so on and so forth. To enforce a diktat that international cricketers should not disagree with the umpires is NONSENSE.
Dissent: the fact of having or expressing opinions that are different from those that are officially accepted. (In this case, umpire's decision is final!)
If a batsman is given out, and the captain of the fielding side calls him back, isn't that dissent too?
ICC has no f&%king clue about the world they live in.
What sort of a society wouldn't accept dissent? Chris Broad, the match referee, who says, "It is not acceptable for any player, let alone a captain, to question an umpire's decision."
Broad should throw away his British passport and take up an honorary citizenship in Saudi Arabia.
The right to dissent is the very essence of equality enshrined in democracy. If ICC and its officers like Broad keep behaving like feudal lords, then the real stakeholders of the game (the ones who play and watch it) should get rid of the ICC through democratic means.
All the ICC member countries (with the exception of Zimbabwe and Pakistan) have excellent democratic record. We shouldn't allow the existence of an anti-democratic institution within a democratic space.
It is a pity that some people think: enforcement of authority ensures respect.
Though not just yet. Fatherland Security has informed me that television producer Matt Pascarella and I have been charged with unauthorized filming of a “critical national security structure” in Louisiana.
There has been a great deal of media coverage over the last one week on the 'campus crisis' in BITS Dubai campus. Mainstream media (newspapers) and parallel media in the form of blogs have brought out many aspects of the 'BITS Dubai circus.'
It all started with 7Days publishing a story on the 8th of September:
In yet another case of a school administration trying to ban student blogging, three engineering students at a campus in Knowledge Village in Dubai have been suspended indefinitely, raising questions about freedom of speech and expression. A notice on one of the boards at the ‘Birla Institute of Technology and Science – Pilani’ campus in Dubai lists the names of three suspended students. [more].
Hundreds of students assembled in front of their college yesterday (10 Sep) after 12 of them were temporarily suspended for bullying, or ‘ragging’, the new entrants. According to the director of Birla Institute of Technology and Science (BITS)-Pilani, the action was taken after first year students complained that senior students asked them to perform “unnatural acts”.
“All the senior students were assembled on the excuse of signing some documents and an identification was conducted with the first year students standing behind a dark glass." [more]
Bullying clampdown [link]
Authorities at the BITS-Pilani campus in Knowledge Village have hired the services of a private security company to clamp down on bullying of new students. Four security guards from the private company were yesterday keeping watch at the institute, where 12 seniors were suspended this week for ‘terrorising juniors’.
The Director of the Institute Dr M Ramachandran yesterday told 7DAYS that new students were asked to simulate sex acts as part of an initiation. “Freshers were scared to even go to the canteen and some parents even wanted to withdraw their kids… BITS-Pilani is one of the most reputable institutions in India and… it is unfair to let 12 students damage the reputation,” he added.
Too many questions remain.
Is Dr. Ramachandran worried about the institution in Dubai or about the reputation of BITS-Pilani?
The image of BITS has been tarnished anyway. BITS-Pilani was not founded to be a money-making monster.
In 1964, the Birla Colleges of Arts, Commerce, Engineering, Pharmacy and Science were merged to form the Birla Institute of Technology and Science (BITS). In this period of inception (especially during 1964-1970), BITS Pilani received support from the Ford Foundation and benefited from an alliance with the MIT.I just cannot find any good reputation when an institution takes the path of profiteering through the trade of higher and technical education. It is like the naked emperor trying to cover himself with a transparent cloth.
From reading these news and blog articles, I wonder whether the security guards have been deployed to protect juniors or to bully students in general.
From a management's point of view there has been a disciplinary breakdown in the campus. Getting students to sign a sacred document when they join the course is not simply good enough. The campus atmosphere should be one of peace and creative excellece.
This can only be achieved by teachers and management providing a supporting system to all the students. From the comments and blogs I have read so far -- it seems the institution has managed to create an extremely hostile environment in the campus - through some draconian regulations.
It is about time that the Ministry of Education, UAE, conducted an enquiry into the whole affair. Dubai's reputation also gets damaged just because it has a 'problem tenant' in its Knowledge Village facility. Today, after reading the 7days report a friend told me, "With the private security guards and parading of senior students for identification -- with the first year students standing behind a dark glass... it sounds very unprofessional and conspiratory in nature. It doesn't sound like what happens in any of the university campuses around the world."
Reasoning should prevail. To expect students to behave like young army cadets is wrong. It is up to the mature and responsible Teachers and Officials to provide the right kind of atmosphere of friendship and peace. It is sad that some people think that enforcement of authority ensures respect.
The current ruler of Dubai is a glowing example. He has ensured that Dubai is a friendly and peaceful place for all nationalities to live, work and prosper.
Let good reason and peace prevail in BITS Dubai too.
Katrina was a big lottery for the powerful and rich of the United States of America.
Top Hurricane Expert Says Officials Threatened His Job Over Pre-Katrina Warnings
On the eve of the first anniversary of Hurricane Katrina, investigative journalist Greg Palast reports that a top hurricane expert says government officials threatened his job over his warnings about the impending disaster. [includes rush transcript] Tomorrow marks the first anniversary of Hurricane Katrina that ravaged the Gulf Coast of Louisiana, Mississippi and Alabama. The storm was the most powerful and expensive natural disaster to hit the U.S- killing more than 1,500 people in New Orleans alone, displacing some 770,000 residents and destroying over 300,000 homes. The federal government's response to the disaster was widely condemned - images of the tens of thousands of New Orleans residents piling into the city's superdome stadium pleading for food, water and aid became symbolic of the government's inaction.
In the aftermath of the storm, it become increasingly clear that the effects of Hurricane Katrina were made far worse by government incompetence and neglect. Warnings about the severity of the storm were ignored and the levees which were supposed to prevent New Orleans from flooding were grossly inadequate. And, as investigative reporter Greg Palast reveals in his new report, there were major holes in the city's evacuation plan.
Greg Palast, investigative reporter and author of "Armed Madhouse" reports from New Orleans. Produced by Jacquie Soohen of Big Noise Films and Matt Pascarella.
Read more on Democracy Now!