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Category: Business

  • VW ‘an accident waiting to happen’

    Experts on corporate governance tell the New York Times they’re not surprised by the troubles at Volkswagen.

    Company CEO Martin Winterkorn resigned this week after revelations that more than 11 million cars had been equipped with software designed to falsify emissions tests.

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    Oversight of the German company has been split between family stockholders, government and labor interests. As the interactive Muckety map above shows, stakeholders include Qatar and Lower Saxony, a German state.

    Until earlier this year, Ferdinand Piech, grandson of Porsche founder Ferdinand Porsche, was chairman. He stepped down after a failed attempt to unseat Winterkorn. His wife and former nanny, Ursula Piech, left the board at the same time.

    The Guardian notes that VW has a long history of boardroom battles.

    The company got its start when Adolf Hitler directed Ferdinand Porsche to build a “people’s car.”

    Today, its supervisory board has 20 members, including two representatives from Qatari, two from Lower Saxony, five members of the Porsche and Piëch families, and 10 union officials.

    “The governance of Volkswagen was a breeding ground for scandal,” Charles M. Elson, professor of finance and director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, told the Times. “It was an accident waiting to happen.”

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    The relationship map to the left is interactive.
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    • VW ‘an accident waiting to happen’

      September 26, 2015 at 7:53am

      Experts on corporate governance tell the New York Times they’re not surprised by the troubles at Volkswagen.

    • Is Warren Buffett eying Costco?

      Can a Muckety map predict a corporate acquisition?

      Notice how the extended Buffett-Gates cartel has surrounded Costco.

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      Should you hear rumblings about a Berkshire Hathaway acquisition, remember this map.

      Berkshire vice chairman Charles Munger is a director of Costco. Susan Decker is on the boards of both companies.

      Warren Buffett
      Warren Buffett

      Warren Buffett pal Bill Gates is a director of Berkshire, and Buffett, of course, is a major benefactor of the Bill and Melinda Gates Foundation.

      Gates’s dad, William Sr., is a director of Costco and co-chair of the Gates Foundation. And Jeffrey Raikes, another director of Costco, is the foundation’s CEO.

      Gates Sr. and company Chairman Jeff Brotman have both served as trustees of the University of Washington. (Gates’s sister, Kristianne Blake, is a current regent.)

      Berkshire’s connection to Costco is nothing new. Munger has been a Costco director since 1997; Gates Sr. joined the board in 2003 and Decker joined in 2004. Raikes was elected four years later.

      So the bonds have strengthened gradually over the years, in a way that closely resembles Buffett’s investment style.

      And Buffett has said many times that he likes to invest in businesses he knows…

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      The relationship map to the left is interactive.
      • Solid lines are current relations. Dotted lines are former relations.
      • Expand items with + signs by double-clicking or by selecting multiple items in the map and pressing the “e” key.
      • Move an item in the map by clicking and dragging.
      • You can also delete items, separate boxes and save maps. Right-click on the map or select Map Tools for these options.
      • Find out more about an item in the map by right-clicking on the item and choosing Information about…
      • View map color key.
      • This interactive map requires Flash player.


      • Kerry’s finances unlikely to draw same scrutiny as Clinton’s

        December 25, 2012 at 3:58pm

        Like the current secretary of State, John Heinz belongs to a family connected to millions of dollars in nonprofit activities.

      • Dimon rides high on JPMorgan report of $2.7 billion profit

        On today’s financial battlefield, Jamie Dimon is Achilles, standing tall among his bloodied opponents, ready to drag their bodies in triumph.

        Is he a hero or a brute?

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        While so many others have fallen, he has led his company, JPMorgan Chase, to record revenues. The firm today reported profits of $2.7 billion in the second quarter, on revenues of $27.7 billion.

        Jamie Dimon
        Jamie Dimon

        “Throughout this crisis, we have remained committed to doing our part to help bring stability to the communities in which we operate and to the financial system overall,” announced the chairman and CEO.

        Dimon knows opportunity when he sees it. Calling him “one of America’s most powerful and outspoken bankers,” The New York Times notes that he is taking advantage of the financial crisis to surge well ahead of his competitors.

        The company took $25 billion in federal bailout money last year. Although he initially supported the government’s Troubled Asset Relief Program, Dimon reportedly chafed at his company being described as a bailed-out bank. JPMorgan repaid its TARP funds ahead of schedule.

        In buying out Bear Stearns and Washington Mutual, the company extended its reach not only in the financial world, but in Washington.

        Now Dimon, a director of the New York Fed, is talking tough to the Treasury Department, opposing tighter supervision of the derivatives market.

        The firm has a battery of lobbying firms in Washington, bending the ears of members of Congress about this issue and other regulatory proposals.

        “Derivatives didn’t cause the problem,” Dimon told the Economic Times last month. “They helped amplify it. It’s a perfectly legitimate instrument and we are the largest derivative dealer in the world.”

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        • America loses Cronkite

          July 18, 2009 at 1:00pm

          Only Walter Cronkite could have summed up in two words the drive that propelled him to his iconic role as the most trusted voice in broadcast news.

        • Testimony Begins in Aig Suit Against Hank Greenberg

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        • Big Ed Whitacre Will Take Reins at Gm

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        • Sec Charges Mozilo and 2 Other Former Countrywide Execs

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        • Blackrock May Profit From Fiscal Crisis in Many Ways

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        • GM considers move from Detroit’s Renaissance Center

          The most visible and commanding element of Detroit’s riverfront skyline is a tubular 73-story hotel girded by four squarish 39-story office towers, all gleaming with mirrored glass. It’s called the Renaissance Center, or RenCen, but the logo at the top of the complex is “GM” – identifying it as home and world headquarters to the immensely troubled General Motors Corp.

          So when GM CEO Fritz Henderson raised the possibility Monday that the giant automaker could vacate the structure and move to the suburbs, joining Ford and Chrysler as absentee figureheads of the Motor City, it raised the threat of both real and symbolic devastation for Detroit.

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          Henderson, who made his comments during a press teleconference, took pains to stress that GM doesn’t “have any such plans,” at least as he spoke. Then he added the hook: “But if we did, it would be motivated by business rationale, which would be cost, efficiency and speed.

          Renaissance Center
          Renaissance Center

          “We’re looking at, frankly, everything within our business, but it’s not like we have that queued up at the top of our list. But as we look at the structure, look at the business, we’re looking at everything.”

          Having posted yet another astronomical quarterly loss – $6 billion for the first three months of 2009 – and already operating on more than $15 billion in federal loans, GM has until June 1 to come up with a restructuring plan that meets the approval of the Obama administration.

          If that includes a move out of the RenCen as part of those cost-cutting measures, it will take some 4,300 white-collar workers off Detroit income tax rolls and potentially leave yet another vacant office structure in the city’s downtown, which already has a reported vacancy rate of 30 percent. GM also pays the city about $6 million in property taxes.

          Mayor Jim Fouts of the blue-collar suburb Warren – Michigan’s third largest city, which borders Detroit on the north and has been home to GM’s one-square-mile Tech Center since 1955 – raised civic hackles last week when he suggested relocating the corporate headquarters to his city as a cost-cutting move. He pointedly dangled a carrot of no city income taxes, “unlike our sister city to the south.”

          Fouts told the Detroit Free Press that he brought it up during a private meeting with Ed Montgomery, Obama’s point man in recovery assistance for autoworkers and their communities, and Michigan Gov. Jennifer Granholm.

          Detroit’s brand-new mayor, Dave Bing – who is already tasked with finding solutions for his city’s 20-plus percent unemployment, vast residential ruin and commercial blight, multimillion-dollar deficits, epidemic crime, and enough municipal corruption to keep the FBI scurrying in an ongoing investigation – called the possibility of a GM decampment “absolutely horrendous.”

          The RenCen had been shopped unsuccessfully for two years when GM bought it for $73 million in 1996, later borrowing $500 million to reconfigure the maze-like interior design that had always frustrated visitors, and to remove massive concrete berms outside the structure that effectively cut off its entrance from the rest of downtown and gave it the feel of a well-defended citadel.

          When the complex opened in 1977, it was at an announced cost of $340 million and was the largest private construction project in Michigan history, financed by an alliance between 51 local companies, led by Henry Ford II.

          A public contest was held to give it a fitting name, and the winner was Renaissance Center, symbolizing a rebirth that, in more than 30 years since, has never come to Detroit.

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          • GOP Gov. Jon Huntsman Jr. nominated as China ambassador

            May 16, 2009 at 3:04pm

            President Obama seems to have pulled off a slick three-fer today in announcing his nomination of Republican Utah Gov. Jon M. Huntsman Jr. as U.S. ambassador to China.

          • SEC sues money-fund manager Bruce Bent

            A man who fundamentally changed the nature of investing in this country has been accused of misleading investors last year.

            Bruce R. Bent Sr., 71, the co-founder of the first money market mutual fund, is the object of a civil lawsuit by the Securities and Exchange Commission that was filed Tuesday in federal court in Manhattan.

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            His son, Bruce Bent II, 43, the co-CEO of the fund known as the Reserve Primary Fund, is also cited in the complaint.

            Another Bent company, Reserve Management Company Inc., the fund’s manager, and Reserve Partners Inc., a broker-dealer run by Reserve Management, are also named as defendants.

            The suit charges the Bents with the “knowing dissemination of false information” about the impact of the bankruptcy of Lehman Brothers Holdings Inc. last September upon the Reserve Fund.

            According to the complaint, the Reserve Fund held $785 million in Lehman debt securities, securities that had become worthless.

            The SEC alleges that the Bents falsely assured shareholders and the fund’s trustees that, despite the Lehman loses, Reserve Management had enough capital or available credit to keep the fund’s net asset value above $1 a share.

            This proved not to be the case, and eventually the Bents acknowledged that the fund had “broken the buck” and the net asset value was below $1 a share.

            This prompted a run on the fund and a call for tougher regulation of money market funds in general.

            The Reserve Fund, which had been valued at $62.5 billion, is now in liquidation, with about 90 percent of its assets returned to investors.

            Reserve Management has held back about $3.5 billion pending the outcome of about 29 civil lawsuits. The SEC is asking that this money be released and distributed to investors in the fund.

            In a statement, the elder Bent said, “We remain confident that we acted in the best interest of our shareholders. We are hopeful that this matter can be resolved quickly.”

            Bent was a money manager at the Teachers Insurance and Annuity Association in the late 1960s.

            One day, he and his boss, Henry B. R. Brown, began chatting about strategies that would allow small investors to get higher rates on return than those offered by savings accounts.

            “I looked up at Brown and said, ‘Why not a mutual fund?’” Bent later told Fortune magazine. “He said he didn’t know anything about mutual funds. I said, ‘I don’t know anything about mutual funds either, but I think it would work.’”

            The pair went out on their own, starting the Reserve Fund in 1972. By the beginning of January 1973, they were managing $1 million.

            A story then ran that month in The New York Times, prompting interest in the fund. By the end of the year Brown and Bent were managing $100 million and mutual funds were proliferating.

            Brown, who died last August, left company management in 1985, but retained a financial interest in the business until Bent bought him out in 1999.

            In 2001, Bent ran unsuccessfully as a Republican for Nassau (NY) County executive, promising that he would serve at $1 a year and that he would improve efficiency in the government.

            This emphasis on fiscal restraint reflected Bent’s original investment principles at the Reserve Fund, which was seen as low-risk.

            But according to The Wall Street Journal, the fund’s strategies changed in 2006 and it began to invest in higher-risk financial products, including the commercial paper from Lehman Brothers that led to the fund’s demise.

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            • Dave Bing, political neophyte, will be Detroit’s oldest mayor

              May 10, 2009 at 12:42pm

              When pro basketball hall-of-famer Dave Bing was elected May 5 as Detroit’s third mayor in less than a year, a voter turnout of just 14 percent showed they’d prefer a duke to an emperor, and age to outrage.

            • NY Fed’s Stephen Friedman resigns over ties to Goldman

              His nickname at Goldman Sachs was “Mr. Inside,” and for decades, Stephen Friedman’s extensive contacts and expertise made him a go-to player on Wall Street.

              But it was precisely that web of connections that raised conflict-of-interest issues in his latest job as non-executive chairman of the powerful Federal Reserve Bank of New York.

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              Friedman, 71, resigned from the post Thursday amid questions about his continuing ties to Goldman Sachs, which were first raised in a Wall Street Journal story Monday.

              “Although I have been in compliance with the rules, my public service motivated continuation on the Reserve Bank Board is being mischaracterized as improper,” he wrote in a letter to New York Fed President William Dudley. “The Federal Reserve System has important work to do and does not need this distraction.”

              In its story, the Journal had disclosed that Friedman was allowed to lead the New York Fed and remain a Goldman director and shareholder, in violation of Fed policy because of Goldman’s new status as a bank holding company. The New York Fed sought a one-year waiver of that rule, which was granted by the Federal Reserve board in Washington in January.

              While the waiver was under consideration, in December, Friedman bought 37,300 more Goldman shares, the paper reported. He also bought more shares the day after the waiver came through. The purchases, which gave him a $3 million paper gain, were disclosed in Securities and Exchange Commission filings.

              Friedman originally told the Journal that his role at the New York Fed wasn’t a policy-making one and that he saw “no conflict whatsoever in owning shares” of Goldman.

              He noted that when he became an economic adviser to former President George W. Bush, he had had to sell nearly all his investments, in a process he described as “very costly and a difficult thing to manage.”

              A longtime star of the financial world, Friedman had worked as an investment banker, a private-equity executive and an economic adviser to the president.

              The bulk of his career, however, was spent at Goldman Sachs, where he held numerous executive roles. He was the company’s co-chief operating officer from 1987 to 1990, co-chairman, along with his longtime friend Robert E. Rubin, from 1990 to 1992, and the sole chairman from 1992 to 1994; he still serves as a director.

              Admired for his intelligence and low-key style, Friedman has a welter of relationships in the philanthropic world as well. He is chairman emeritus of the board of Columbia University, where he attended law school, chairman emeritus of the executive committee of the Brookings Institution, and a member of the Council on Foreign Relations.

              Out of work, he is said to be an avid chess player and wrestler. A wrestling center at his alma mater, Cornell University, bears his name. His son David Benioff, wrote the screenplay for The Kite Runner and X-Men Origins: Wolverine and is married to actress Amanda Peet. His brother, Richard, is a constitutional law scholar at the University of Michigan.

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