Angelo Mozilo, former boss of Countrywide Financial, has been charged with civil fraud and insider trading by the Securities and Exchange Commission.
He is the highest profile executive to face charges relating to the US sub-prime mortgage crisis in 2007.
Bank of America eventually rescued the biggest US mortgage lender, buying it for $2.5bn (£1.5bn) in July 2008.
Mr Mozilo has denied doing anything wrong. Two other former executives have also been charged with civil fraud.
Former chief operating officer David Sambol and former chief financial officer Eric Sieracki "misled the market by falsely assuring investors that Countrywide was a prime quality mortgage lender that had avoided the excesses of its competitors", the SEC alleged.
It added that Mr Mozilo had deliberately misled investors about the credit risks that the company was taking.
'Flying blind'
The SEC also said that he had made nearly $140m in profit from selling his Countrywide shares "based on non-public information".
The sub-prime crisis, which was caused by mortgages being given to people who could not really afford them.
The loans were then repackaged by banks and sold on to investors, made to look like low-risk investments.
The SEC published extracts from e-mails sent by Mr Mozilo.
"The bottom line is that we are flying blind on how these loans will perform in a stressed environment of higher unemployment, reduced values and slowing home sales," he wrote on 26 September 2006.
Thursday, June 4, 2009
Sri Lanka doctors 'to be tried'
A group of doctors who worked in Sri Lanka's rebel-held war zone are being held on suspicion of collaborating with Tamil rebels, the government says.
The doctors could be in detention for a year or more before being tried.
With journalists banned from the conflict zone, they became an important source of news about the fighting during the final bloody months of war.
There has been no word from the doctors, whose work was praised by the US and UN, since they were detained.
Last month the Sri Lankan government defeated Tamil Tiger rebels fighting for a separate homeland.
Government infuriated
During the final phase of the war, the group of doctors treated wounded and ill patients admitted to the makeshift health posts in the Liberation Tigers of Tamil Eelam (LTTE)-held zone encircled by government forces.
Two of them were senior local health directors and the United States has said they "helped save many lives" while the UN called them "heroic".
But the BBC's Charles Haviland in Colombo says that the government was infuriated by the doctors' media interviews from the zone, in which they said some of the shelling there had come from the government side and had killed civilians.
In an interview with BBC World TV, Sri Lankan Foreign Minister Rohita Bogollagama accused the doctors of "spreading falsehoods". He said that the International Committee of the Red Cross (ICRC) had full access to them.
Mr Bogollagama said the issue was whether the pair had been looking after civilians or whether they had been used by the rebels "for other purposes".
"What is the heroic act the doctors have done in terms of supporting the Tamil Tigers agenda?" he asked.
'Conspiracy'
In the final stages of the war the doctors made no comment on the allegations from the government that they were supporting the rebels.
Human Rights Minister Mahinda Samarasinghe told the BBC they are being detained at the Criminal Investigation Department on "reasonable suspicion of collaboration with the LTTE".
"I don't know what the investigations would reveal but maybe they were even part of that whole conspiracy to put forward this notion that government forces were shelling and targeting hospitals and indiscriminately targeting civilians as a result of the shelling," he said.
The government says not a single civilian died as a result of its final offensive, despite international allegations to the contrary.
The minister says the doctors must be produced in court every month while investigations proceed pending possible charges.
He said the investigation could last up to a year, but there might be extensions to that.
Separately, Sri Lanka's foreign secretary, Palitha Kohona, has been speaking of the government-run camps where more than 250,000 Tamils from the war zone are detained.
He said everyone there had to be carefully screened, adding that it was "quite likely" that even many elderly people were "with the LTTE, at least mentally".
The doctors could be in detention for a year or more before being tried.
With journalists banned from the conflict zone, they became an important source of news about the fighting during the final bloody months of war.
There has been no word from the doctors, whose work was praised by the US and UN, since they were detained.
Last month the Sri Lankan government defeated Tamil Tiger rebels fighting for a separate homeland.
Government infuriated
During the final phase of the war, the group of doctors treated wounded and ill patients admitted to the makeshift health posts in the Liberation Tigers of Tamil Eelam (LTTE)-held zone encircled by government forces.
Two of them were senior local health directors and the United States has said they "helped save many lives" while the UN called them "heroic".
But the BBC's Charles Haviland in Colombo says that the government was infuriated by the doctors' media interviews from the zone, in which they said some of the shelling there had come from the government side and had killed civilians.
In an interview with BBC World TV, Sri Lankan Foreign Minister Rohita Bogollagama accused the doctors of "spreading falsehoods". He said that the International Committee of the Red Cross (ICRC) had full access to them.
Mr Bogollagama said the issue was whether the pair had been looking after civilians or whether they had been used by the rebels "for other purposes".
"What is the heroic act the doctors have done in terms of supporting the Tamil Tigers agenda?" he asked.
'Conspiracy'
In the final stages of the war the doctors made no comment on the allegations from the government that they were supporting the rebels.
Human Rights Minister Mahinda Samarasinghe told the BBC they are being detained at the Criminal Investigation Department on "reasonable suspicion of collaboration with the LTTE".
"I don't know what the investigations would reveal but maybe they were even part of that whole conspiracy to put forward this notion that government forces were shelling and targeting hospitals and indiscriminately targeting civilians as a result of the shelling," he said.
The government says not a single civilian died as a result of its final offensive, despite international allegations to the contrary.
The minister says the doctors must be produced in court every month while investigations proceed pending possible charges.
He said the investigation could last up to a year, but there might be extensions to that.
Separately, Sri Lanka's foreign secretary, Palitha Kohona, has been speaking of the government-run camps where more than 250,000 Tamils from the war zone are detained.
He said everyone there had to be carefully screened, adding that it was "quite likely" that even many elderly people were "with the LTTE, at least mentally".
PM told to go as minister quits
James Purnell has stepped down from the cabinet and told Prime Minister Gordon Brown to "stand aside".
In a letter to several newspapers, the work and pensions secretary said Mr Brown's continued leadership made a Tory victory "more, not less likely".
He is the third cabinet member in three days to say they are standing down.
Downing Street said Mr Brown was "disappointed" but would be getting on with the job but David Cameron said the government was "falling apart".
Mr Brown was set to reshuffle his team within days as he fights to hang on to his tenure as prime minister.
'Fighting chance'
But in his letter to Mr Brown, published in Friday's newspapers, Mr Purnell said he owed it to the Labour Party to "say what I believe no matter how hard that may be".
He said he was not seeking the leadership but wrote: "I now believe your continued leadership makes a Conservative victory more, not less likely. That would be disastrous for our country."
He added: "I am therefore calling on you to stand aside to give our party a fighting chance of winning. As such I am resigning from government."
The BBC understands Mr Purnell only came to his decision to resign on Thursday but is said to have been frustrated for some time.
BBC political editor Nick Robinson said it was the first direct challenge to Mr Brown from a cabinet minister.
Mr Purnell's resignation was a message to the rest of the Labour Party to make up their minds about Mr Brown's leadership, he said.
'Undivided attention'
A Downing Street spokesman said: "The prime minister is disappointed by the resignation of James Purnell, of which he was informed shortly before 10pm."
He said Mr Brown's focus over coming days would be "restructuring the government on the big challenges facing the country for the future", tackling the global economic downturn, trust in Parliament and reforming public services.
"He will continue to give his undivided attention to addressing these great challenges facing our country and putting the interests of the British people first and foremost," he said.
But Conservative leader Mr Cameron, repeating his call for an immediate general election, said: "In a deep recession and a political crisis we need a strong united government. Instead we have a government falling apart in front of our eyes."
Meanwhile, other cabinet ministers have been rallying round Mr Brown.
Defence Secretary John Hutton, said Mr Purnell was a "good friend" but added: "I think he has made the wrong decision because I firmly believe that Gordon Brown is the right man to lead our party and our country."
Northern Ireland Secretary Shaun Woodward also said he was "deeply disappointed" by Mr Purnell's decision and that he fully backed Mr Brown.
'Ultra Blairite'
A source close to Justice Secretary Jack Straw said he was "very surprised and deeply saddened" by the news and "remained very supportive" of Mr Brown.
And the BBC understands Foreign Secretary David Miliband, who was touted as a possible challenger to Gordon Brown's leadership last year, does not intend to resign and had said he did not agree with Mr Purnell.
Other Labour figures have strongly criticised the decision - former London mayor Ken Livingstone said it was no surprise as Mr Purnell had been "the most ultra-Blairite of ministers".
"If you were going to get a knife in the back it's where you would have expected it from," he said.
Backbencher Peter Kilfoyle, one of the few Labour MPs not to back Mr Brown for the leadership in 2007, told the BBC: "I'm very dismayed by the attitude of people like Purnell and indeed Hazel Blears."
He said they had been "self serving" in backing Mr Brown for the leadership and the cabinet should back him now: "They have a wider responsibility than merely their personal careers. It's also about the future of the Labour Party, not just in government but in the country."
The news comes as the polls closed across the UK for the European elections and, in England, 27 county and seven unitary council elections.
Secret ballot
Senior Labour backbencher Barry Sheerman told the BBC there should be a ballot of Labour MPs to see if Gordon Brown still has the confidence of the party.
He told the BBC: "This goes far beyond just a few people, this is a large number of us who are really unhappy about the present situation."
But Labour's leader in the Lords Baroness Royall defended Mr Brown's style of leadership on BBC One's Question Time.
She said: "We haven't got a media star, we have got a person who works damned hard and is taking us through the economic crisis."
There have been predictions Labour could be pushed into third or fourth place in the Euro elections behind the UK Independence Party (UKIP), following damaging revelations about expenses claims in the Daily Telegraph.
Mr Brown's much anticipated reshuffle was pre-empted earlier this week with the news that Jacqui Smith had asked to step down as home secretary.
Fevered atmosphere
She later said she believed Gordon Brown was the right person to lead the Labour Party but was stepping down for her family - who had been "at the forefront" of expenses allegations against her.
Then Hazel Blears announced on Wednesday that she would be stepping down as communities secretary.
In her resignation statement she did not pay the customary tribute to the prime minister, who weeks ago had described her own actions on expenses as "totally unacceptable".
Alistair Darling's position as chancellor is also thought to be vulnerable after questions about his expenses.
Amid a fevered atmosphere at a Westminster - where the expenses saga has dominated the agenda during the election - two junior ministers Beverley Hughes and Tom Watson have also said they are to step down.
Some Labour backbench MPs say they are circulating a letter among MPs seeking support for a call on Mr Brown to go.
About 70 Labour MPs would be required to nominate a specific alternative candidate to trigger a leadership contest.
In a letter to several newspapers, the work and pensions secretary said Mr Brown's continued leadership made a Tory victory "more, not less likely".
He is the third cabinet member in three days to say they are standing down.
Downing Street said Mr Brown was "disappointed" but would be getting on with the job but David Cameron said the government was "falling apart".
Mr Brown was set to reshuffle his team within days as he fights to hang on to his tenure as prime minister.
'Fighting chance'
But in his letter to Mr Brown, published in Friday's newspapers, Mr Purnell said he owed it to the Labour Party to "say what I believe no matter how hard that may be".
He said he was not seeking the leadership but wrote: "I now believe your continued leadership makes a Conservative victory more, not less likely. That would be disastrous for our country."
He added: "I am therefore calling on you to stand aside to give our party a fighting chance of winning. As such I am resigning from government."
The BBC understands Mr Purnell only came to his decision to resign on Thursday but is said to have been frustrated for some time.
BBC political editor Nick Robinson said it was the first direct challenge to Mr Brown from a cabinet minister.
Mr Purnell's resignation was a message to the rest of the Labour Party to make up their minds about Mr Brown's leadership, he said.
'Undivided attention'
A Downing Street spokesman said: "The prime minister is disappointed by the resignation of James Purnell, of which he was informed shortly before 10pm."
He said Mr Brown's focus over coming days would be "restructuring the government on the big challenges facing the country for the future", tackling the global economic downturn, trust in Parliament and reforming public services.
"He will continue to give his undivided attention to addressing these great challenges facing our country and putting the interests of the British people first and foremost," he said.
But Conservative leader Mr Cameron, repeating his call for an immediate general election, said: "In a deep recession and a political crisis we need a strong united government. Instead we have a government falling apart in front of our eyes."
Meanwhile, other cabinet ministers have been rallying round Mr Brown.
Defence Secretary John Hutton, said Mr Purnell was a "good friend" but added: "I think he has made the wrong decision because I firmly believe that Gordon Brown is the right man to lead our party and our country."
Northern Ireland Secretary Shaun Woodward also said he was "deeply disappointed" by Mr Purnell's decision and that he fully backed Mr Brown.
'Ultra Blairite'
A source close to Justice Secretary Jack Straw said he was "very surprised and deeply saddened" by the news and "remained very supportive" of Mr Brown.
And the BBC understands Foreign Secretary David Miliband, who was touted as a possible challenger to Gordon Brown's leadership last year, does not intend to resign and had said he did not agree with Mr Purnell.
Other Labour figures have strongly criticised the decision - former London mayor Ken Livingstone said it was no surprise as Mr Purnell had been "the most ultra-Blairite of ministers".
"If you were going to get a knife in the back it's where you would have expected it from," he said.
Backbencher Peter Kilfoyle, one of the few Labour MPs not to back Mr Brown for the leadership in 2007, told the BBC: "I'm very dismayed by the attitude of people like Purnell and indeed Hazel Blears."
He said they had been "self serving" in backing Mr Brown for the leadership and the cabinet should back him now: "They have a wider responsibility than merely their personal careers. It's also about the future of the Labour Party, not just in government but in the country."
The news comes as the polls closed across the UK for the European elections and, in England, 27 county and seven unitary council elections.
Secret ballot
Senior Labour backbencher Barry Sheerman told the BBC there should be a ballot of Labour MPs to see if Gordon Brown still has the confidence of the party.
He told the BBC: "This goes far beyond just a few people, this is a large number of us who are really unhappy about the present situation."
But Labour's leader in the Lords Baroness Royall defended Mr Brown's style of leadership on BBC One's Question Time.
She said: "We haven't got a media star, we have got a person who works damned hard and is taking us through the economic crisis."
There have been predictions Labour could be pushed into third or fourth place in the Euro elections behind the UK Independence Party (UKIP), following damaging revelations about expenses claims in the Daily Telegraph.
Mr Brown's much anticipated reshuffle was pre-empted earlier this week with the news that Jacqui Smith had asked to step down as home secretary.
Fevered atmosphere
She later said she believed Gordon Brown was the right person to lead the Labour Party but was stepping down for her family - who had been "at the forefront" of expenses allegations against her.
Then Hazel Blears announced on Wednesday that she would be stepping down as communities secretary.
In her resignation statement she did not pay the customary tribute to the prime minister, who weeks ago had described her own actions on expenses as "totally unacceptable".
Alistair Darling's position as chancellor is also thought to be vulnerable after questions about his expenses.
Amid a fevered atmosphere at a Westminster - where the expenses saga has dominated the agenda during the election - two junior ministers Beverley Hughes and Tom Watson have also said they are to step down.
Some Labour backbench MPs say they are circulating a letter among MPs seeking support for a call on Mr Brown to go.
About 70 Labour MPs would be required to nominate a specific alternative candidate to trigger a leadership contest.
Wednesday, June 3, 2009
Rohit Sharma shines as India beat Pakistan by nine wickets
Openers Rohit Sharma and Gautam Gambhir put on 140 runs to help India pummel Pakistan by nine wickets in an ICC Twenty20 warmup tie that resembled a final in its festive look at the Oval cricket ground on Wednesday.
Sharma, opening in place of Virender Sehwag, hit a brilliant and confident 80 off only 53 balls (9x4, 2x6) as defending world champions India took only 17 overs to score 159 for one, easily overhauling Pakistan's 158 for six.
Gambir remained not out on 53 (47 balls, 5X4) to see India through to victory in the company of his skipper M.S. Dhoni, (nine runs, 2X4).
Playing before a stadium packed with delirious Indian and Pakistani supporters, India gave a masterly display of Twenty20 cricket - first restricting what looked like a rampaging Pakistan side to 158 and then knocking up the winning runs with remarkable ease.
Earlier, captain Younis Khan and Misbah-ul-Haq helped Pakistan put on 158 for six in a batting performance that began in marauding fashion but failed to live up to expectations.
Electing to bat before a nearly exclusively South Asian crowd, Pakistan began disastrously, losing opener Shahzaid Hasan for a duck to Praveen Kumar in the first over.
Spinner Harbhajan Singh dropped teenage batting sensation Ahmed Shehzad in the very next over off R.P. Singh before Shehzad (25 off 19 balls, 5 fours) and Kamran Akmal (19 off nine, 4 fours) began wreaking carnage on Kumar and Singh, hammering them to all corners of the Oval.
The men in blue then bounced back, to the delight of tens of thousands of supporters, and grabbed four quick wickets to leave Pakistan tottering on 63 for five before Younis Khan (32 off 32 balls) came up with a captain's innings in the company of Misbah (37 off 30).
Kumar, Irfan Pathan, Ishant Sharma, Harbhajan Singh and P.P. Ojha took one wicket each for India, while Suresh Raina ran out Akmal.
India left out Virender Sehwag and Zaheer Khan, and Pakistan were without Salman Butt and Ifthikar Anjum in a 13-a-side game, where only 11 could field at any given time.
Brief scores:
Pakistan: 158 for six (Misbah-ul-Haq 37, Y. Khan 32, S. Ahmed 25, Y. Arafat 25, I. Sharma one for 11)
India: 159 for one (R. Sharma 80, G. Gambhir 53, M.S. Dhoni 9, Mohammad Aamer one for 18).
Sharma, opening in place of Virender Sehwag, hit a brilliant and confident 80 off only 53 balls (9x4, 2x6) as defending world champions India took only 17 overs to score 159 for one, easily overhauling Pakistan's 158 for six.
Gambir remained not out on 53 (47 balls, 5X4) to see India through to victory in the company of his skipper M.S. Dhoni, (nine runs, 2X4).
Playing before a stadium packed with delirious Indian and Pakistani supporters, India gave a masterly display of Twenty20 cricket - first restricting what looked like a rampaging Pakistan side to 158 and then knocking up the winning runs with remarkable ease.
Earlier, captain Younis Khan and Misbah-ul-Haq helped Pakistan put on 158 for six in a batting performance that began in marauding fashion but failed to live up to expectations.
Electing to bat before a nearly exclusively South Asian crowd, Pakistan began disastrously, losing opener Shahzaid Hasan for a duck to Praveen Kumar in the first over.
Spinner Harbhajan Singh dropped teenage batting sensation Ahmed Shehzad in the very next over off R.P. Singh before Shehzad (25 off 19 balls, 5 fours) and Kamran Akmal (19 off nine, 4 fours) began wreaking carnage on Kumar and Singh, hammering them to all corners of the Oval.
The men in blue then bounced back, to the delight of tens of thousands of supporters, and grabbed four quick wickets to leave Pakistan tottering on 63 for five before Younis Khan (32 off 32 balls) came up with a captain's innings in the company of Misbah (37 off 30).
Kumar, Irfan Pathan, Ishant Sharma, Harbhajan Singh and P.P. Ojha took one wicket each for India, while Suresh Raina ran out Akmal.
India left out Virender Sehwag and Zaheer Khan, and Pakistan were without Salman Butt and Ifthikar Anjum in a 13-a-side game, where only 11 could field at any given time.
Brief scores:
Pakistan: 158 for six (Misbah-ul-Haq 37, Y. Khan 32, S. Ahmed 25, Y. Arafat 25, I. Sharma one for 11)
India: 159 for one (R. Sharma 80, G. Gambhir 53, M.S. Dhoni 9, Mohammad Aamer one for 18).
Senators grill GM, Chrysler executives on dealer cuts
Executives from bailed-out General Motors Corp. and Chrysler faced intense congressional heat Wednesday for plans to close about 2,000 dealers as part of their bankruptcies, demonstrating the potential complications of the government's direct involvement in the auto industry.
"I honestly don't believe that companies should be allowed to take taxpayer funds for a bailout and then leave it to local dealers and their customers to fend for themselves with no real plan, no real notice, no real help," said Senate Commerce Committee Chairman John D. Rockefeller IV (D-W.Va.), who convened a hearing on the issue.
The standing-room-only crowd -- which included about 30 dealers and more senators than Rockefeller said he had seen at a hearing in 24 years -- gave weight to suggestions that the Obama administration's decision to take ownership stakes in the companies made members of Congress a rump board of directors.
Lawmakers acknowledged they probably could do little more than make life uncomfortable for the companies. But they also could spread that same discomfort to the Obama administration, which must balance congressional concerns with a vow not to get involved in daily operations of Chrylser or GM.
"If there were any more impetus to try to get back to profitability and try to get the government out of your business . . . today's session ought to be that impetus," Sen. Mark R. Warner (D-Va.) told GM Chief Executive Fritz Henderson and Chrysler President James Press.
Several senators said they were uncomfortable with probing the inner workings of manufacturing companies. But they all agreed the pain and job loss the dealer cuts would impose on communities was a tragedy. Two dealers explained the heartbreak they were facing as their franchise agreements with Chrysler and GM were being terminated.
"To be arbitrarily closed with no compensation is wasteful and devastating," said Russell Aubrey Whatley III, owner of a Chrysler dealership in Mineral Wells, Texas, that has been in his family for decades. "A 90-year investment is just gone and neither my family or my employees have nothing to say about it."
Like nearly every other senator, Rockefeller told of calls and e-mails from dealers in his state complaining about the cuts being enacted by GM and particularly Chrysler, which last month gave 789 dealers less than three weeks to liquidate their vehicles, parts and specialized tools before their franchises are terminated Tuesday.
GM was taking a slower approach, but its cuts affect many more dealers. The company last month notified 1,100 of its 6,000 dealers that it was terminating their franchise agreements by October 2010, with a goal of reducing its dealer network by as much as 42% during that period. As part of its bankruptcy filing, GM notified most of its dealers this week that they will have to operate under strict new rules or the court could end their franchise agreements.
Dealer groups have estimated the cuts could cost 100,000 jobs, as well as billions of dollars in lost state and local tax revenue.
Henderson and Press defended their decisions, saying they were painful ones made so the companies could become leaner and profitable.
"They were gut-wrenching [decisions] but absolutely necessary for Chrysler' survival," Press said.
Obama administration officials pushed them to be more aggressive about their restructuring, but did not dictate the numbers or review a list of dealers whose franchise agreements would be eliminated, the executives said in response to inquiries from Republicans about White House involvement.
Although Chrysler had released a list of dealers it is cutting, GM has not, saying the dealers themselves did not want to be named while they try to wind down their businesses through next year. But the committee flexed some power on that point, as Rockefeller agreed to a request by Sen. Mark Begich (D-Alaska) that GM provide a list. Henderson said he would do so, but it was unclear whether the list would be made public.
But senators did not agree to a request by the National Automobile Dealers Assn. that the government provide more money to Chrysler so it could purchase any leftover vehicles at the dealers it was terminating.
Press said the company had offered help and 97% of the 42,000 vehicles at the dealerships have either been sold or Chrysler has commitments to redistribute them to dealerships that are staying in business.
Chrysler, however, was not guaranteeing it would reimburse dealers for those cars, which after Tuesday they cannot sell.
"Every dealers' biggest fear is on June 9 we lose all options on these cars," Whatley said. "They're just planter boxes on June 9."
On Tuesday, all of GM's dealers received a fresh round of letters, copies of which were reviewed by The Times. One letter, sent to dealers singled out for termination, offered cash payments to help them unwind their businesses, with a goal of selling off their inventories and closing between January 1 and October 31 of next year. Those dealers will still be allowed to provide warranty service, but will not be able to purchase more new vehicles, and must provide their customer lists to GM. In addition, they waive their right to sue the automaker.
"This is a difficult step, but one that is part of GM's court-supervised restructuring efforts," the letter said.
The other letter, sent to dealers that GM intends to maintain, laid out strict new operating rules for dealers, including obligations to purchase more cars and trucks than in the past and boost performance. Each dealer "must substantially increase its sales of new motor vehicles" or face possible elimination. They also must waive their right to sue.
Both letters asked that dealers agree to the new terms in writing by June 12. If not, GM said, it would move to terminate their contracts in U.S Bankruptcy Court.
"If we sign that letter, we sign our life away," said Pete Lopez, whose Chrysler and GM dealerships in Spencer, W. Va., are being terminated.
Henderson said that 647 dealers had already signed and returned the new agreements, while only 10 had declined to sign.
Senators said they normally would not be involved in the business decisions of private companies. But with the government funneling billions of dollars to the two automakers -- and in GM's case taking a majority ownership stake -- they had an obligation to probe complaints from dealers.
"You find yourself with a board of directors of essentially 535 members," said Sen. John Thune (R-S.D.) , who acknowledged he was uncomfortable delving into the inner workings of the companies. "We are now partners and as partners these are the type of questions you get to answer."
"I honestly don't believe that companies should be allowed to take taxpayer funds for a bailout and then leave it to local dealers and their customers to fend for themselves with no real plan, no real notice, no real help," said Senate Commerce Committee Chairman John D. Rockefeller IV (D-W.Va.), who convened a hearing on the issue.
The standing-room-only crowd -- which included about 30 dealers and more senators than Rockefeller said he had seen at a hearing in 24 years -- gave weight to suggestions that the Obama administration's decision to take ownership stakes in the companies made members of Congress a rump board of directors.
Lawmakers acknowledged they probably could do little more than make life uncomfortable for the companies. But they also could spread that same discomfort to the Obama administration, which must balance congressional concerns with a vow not to get involved in daily operations of Chrylser or GM.
"If there were any more impetus to try to get back to profitability and try to get the government out of your business . . . today's session ought to be that impetus," Sen. Mark R. Warner (D-Va.) told GM Chief Executive Fritz Henderson and Chrysler President James Press.
Several senators said they were uncomfortable with probing the inner workings of manufacturing companies. But they all agreed the pain and job loss the dealer cuts would impose on communities was a tragedy. Two dealers explained the heartbreak they were facing as their franchise agreements with Chrysler and GM were being terminated.
"To be arbitrarily closed with no compensation is wasteful and devastating," said Russell Aubrey Whatley III, owner of a Chrysler dealership in Mineral Wells, Texas, that has been in his family for decades. "A 90-year investment is just gone and neither my family or my employees have nothing to say about it."
Like nearly every other senator, Rockefeller told of calls and e-mails from dealers in his state complaining about the cuts being enacted by GM and particularly Chrysler, which last month gave 789 dealers less than three weeks to liquidate their vehicles, parts and specialized tools before their franchises are terminated Tuesday.
GM was taking a slower approach, but its cuts affect many more dealers. The company last month notified 1,100 of its 6,000 dealers that it was terminating their franchise agreements by October 2010, with a goal of reducing its dealer network by as much as 42% during that period. As part of its bankruptcy filing, GM notified most of its dealers this week that they will have to operate under strict new rules or the court could end their franchise agreements.
Dealer groups have estimated the cuts could cost 100,000 jobs, as well as billions of dollars in lost state and local tax revenue.
Henderson and Press defended their decisions, saying they were painful ones made so the companies could become leaner and profitable.
"They were gut-wrenching [decisions] but absolutely necessary for Chrysler' survival," Press said.
Obama administration officials pushed them to be more aggressive about their restructuring, but did not dictate the numbers or review a list of dealers whose franchise agreements would be eliminated, the executives said in response to inquiries from Republicans about White House involvement.
Although Chrysler had released a list of dealers it is cutting, GM has not, saying the dealers themselves did not want to be named while they try to wind down their businesses through next year. But the committee flexed some power on that point, as Rockefeller agreed to a request by Sen. Mark Begich (D-Alaska) that GM provide a list. Henderson said he would do so, but it was unclear whether the list would be made public.
But senators did not agree to a request by the National Automobile Dealers Assn. that the government provide more money to Chrysler so it could purchase any leftover vehicles at the dealers it was terminating.
Press said the company had offered help and 97% of the 42,000 vehicles at the dealerships have either been sold or Chrysler has commitments to redistribute them to dealerships that are staying in business.
Chrysler, however, was not guaranteeing it would reimburse dealers for those cars, which after Tuesday they cannot sell.
"Every dealers' biggest fear is on June 9 we lose all options on these cars," Whatley said. "They're just planter boxes on June 9."
On Tuesday, all of GM's dealers received a fresh round of letters, copies of which were reviewed by The Times. One letter, sent to dealers singled out for termination, offered cash payments to help them unwind their businesses, with a goal of selling off their inventories and closing between January 1 and October 31 of next year. Those dealers will still be allowed to provide warranty service, but will not be able to purchase more new vehicles, and must provide their customer lists to GM. In addition, they waive their right to sue the automaker.
"This is a difficult step, but one that is part of GM's court-supervised restructuring efforts," the letter said.
The other letter, sent to dealers that GM intends to maintain, laid out strict new operating rules for dealers, including obligations to purchase more cars and trucks than in the past and boost performance. Each dealer "must substantially increase its sales of new motor vehicles" or face possible elimination. They also must waive their right to sue.
Both letters asked that dealers agree to the new terms in writing by June 12. If not, GM said, it would move to terminate their contracts in U.S Bankruptcy Court.
"If we sign that letter, we sign our life away," said Pete Lopez, whose Chrysler and GM dealerships in Spencer, W. Va., are being terminated.
Henderson said that 647 dealers had already signed and returned the new agreements, while only 10 had declined to sign.
Senators said they normally would not be involved in the business decisions of private companies. But with the government funneling billions of dollars to the two automakers -- and in GM's case taking a majority ownership stake -- they had an obligation to probe complaints from dealers.
"You find yourself with a board of directors of essentially 535 members," said Sen. John Thune (R-S.D.) , who acknowledged he was uncomfortable delving into the inner workings of the companies. "We are now partners and as partners these are the type of questions you get to answer."
47 police officers questioned in disappearance of Mexican customs official
Nearly 50 police officers were questioned in the disappearance of a top Mexican customs official in the port city of Veracruz, authorities said Wednesday.
The probe targeted traffic police in Veracruz, where customs administrator Francisco Serrano disappeared Monday night from the scene of an apparent traffic collision. Forty-seven police officers were heldfor questioning by federal authorities.Salvador Mikel Rivera, attorney general for the state of Veracruz, said authorities decided to question all officers on duty that night after viewing security camera footage of a crash involving Serrano's vehicle. The footage showed several police cars arriving. Serrano has not been seen since.
Veracruz is the nation's main cargo port on the Gulf of Mexico and watched by customs officials for smuggling of illegal drugs and other contraband.
The action came as federal authorities this week detained 58 police officers in the northern state of Nuevo Leon for suspected ties with drug traffickers. Among those taken into custody were the public safety chiefs in two towns.
for questioning by federal authoritiesPolice corruption remains a major obstacle for Mexican President Felipe Calderon's 30-month-old crackdown on drug cartels and other organized-crime groups.
Though the administration has sought to clean up and reorganize the roughly 25,000-strong federal police, graft is entrenched in cities and small towns, where officers sometimes moonlight as gunmen for drug-smuggling groups.
Calderon has responded by sending the Mexican military to patrol drug-trafficking hot spots. In a growing number of places, retired Mexican army generals and colonels have been put in charge of police.
More than 10,000 people have died in drug-related violence since Calderon launched the nationwide anti-crime offensive in December 2006. Traffickers have fought government forces and feuded with one another over prized smuggling routes
The probe targeted traffic police in Veracruz, where customs administrator Francisco Serrano disappeared Monday night from the scene of an apparent traffic collision. Forty-seven police officers were heldfor questioning by federal authorities.Salvador Mikel Rivera, attorney general for the state of Veracruz, said authorities decided to question all officers on duty that night after viewing security camera footage of a crash involving Serrano's vehicle. The footage showed several police cars arriving. Serrano has not been seen since.
Veracruz is the nation's main cargo port on the Gulf of Mexico and watched by customs officials for smuggling of illegal drugs and other contraband.
The action came as federal authorities this week detained 58 police officers in the northern state of Nuevo Leon for suspected ties with drug traffickers. Among those taken into custody were the public safety chiefs in two towns.
for questioning by federal authoritiesPolice corruption remains a major obstacle for Mexican President Felipe Calderon's 30-month-old crackdown on drug cartels and other organized-crime groups.
Though the administration has sought to clean up and reorganize the roughly 25,000-strong federal police, graft is entrenched in cities and small towns, where officers sometimes moonlight as gunmen for drug-smuggling groups.
Calderon has responded by sending the Mexican military to patrol drug-trafficking hot spots. In a growing number of places, retired Mexican army generals and colonels have been put in charge of police.
More than 10,000 people have died in drug-related violence since Calderon launched the nationwide anti-crime offensive in December 2006. Traffickers have fought government forces and feuded with one another over prized smuggling routes
47 police officers questioned in disappearance of Mexican customs official
Nearly 50 police officers were questioned in the disappearance of a top Mexican customs official in the port city of Veracruz, authorities said Wednesday.
The probe targeted traffic police in Veracruz, where customs administrator Francisco Serrano disappeared Monday night from the scene of an apparent traffic collision. Forty-seven police officers were heldfor questioning by federal authorities.Salvador Mikel Rivera, attorney general for the state of Veracruz, said authorities decided to question all officers on duty that night after viewing security camera footage of a crash involving Serrano's vehicle. The footage showed several police cars arriving. Serrano has not been seen since.
Veracruz is the nation's main cargo port on the Gulf of Mexico and watched by customs officials for smuggling of illegal drugs and other contraband.
The action came as federal authorities this week detained 58 police officers in the northern state of Nuevo Leon for suspected ties with drug traffickers. Among those taken into custody were the public safety chiefs in two towns.
for questioning by federal authoritiesPolice corruption remains a major obstacle for Mexican President Felipe Calderon's 30-month-old crackdown on drug cartels and other organized-crime groups.
Though the administration has sought to clean up and reorganize the roughly 25,000-strong federal police, graft is entrenched in cities and small towns, where officers sometimes moonlight as gunmen for drug-smuggling groups.
Calderon has responded by sending the Mexican military to patrol drug-trafficking hot spots. In a growing number of places, retired Mexican army generals and colonels have been put in charge of police.
More than 10,000 people have died in drug-related violence since Calderon launched the nationwide anti-crime offensive in December 2006. Traffickers have fought government forces and feuded with one another over prized smuggling routes
The probe targeted traffic police in Veracruz, where customs administrator Francisco Serrano disappeared Monday night from the scene of an apparent traffic collision. Forty-seven police officers were heldfor questioning by federal authorities.Salvador Mikel Rivera, attorney general for the state of Veracruz, said authorities decided to question all officers on duty that night after viewing security camera footage of a crash involving Serrano's vehicle. The footage showed several police cars arriving. Serrano has not been seen since.
Veracruz is the nation's main cargo port on the Gulf of Mexico and watched by customs officials for smuggling of illegal drugs and other contraband.
The action came as federal authorities this week detained 58 police officers in the northern state of Nuevo Leon for suspected ties with drug traffickers. Among those taken into custody were the public safety chiefs in two towns.
for questioning by federal authoritiesPolice corruption remains a major obstacle for Mexican President Felipe Calderon's 30-month-old crackdown on drug cartels and other organized-crime groups.
Though the administration has sought to clean up and reorganize the roughly 25,000-strong federal police, graft is entrenched in cities and small towns, where officers sometimes moonlight as gunmen for drug-smuggling groups.
Calderon has responded by sending the Mexican military to patrol drug-trafficking hot spots. In a growing number of places, retired Mexican army generals and colonels have been put in charge of police.
More than 10,000 people have died in drug-related violence since Calderon launched the nationwide anti-crime offensive in December 2006. Traffickers have fought government forces and feuded with one another over prized smuggling routes
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