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Web Rule, Warren Woos, BofA’s TARP Exit: Compliance

Jan. 4 (Bloomberg) -- Internet-service providers may fight U.S. Web-access rules in court, betting they can overturn the Federal Communications Commission chairman’s signature achievement.

The FCC passed regulations that bar Verizon Communications, Inc., Comcast Corp. and other companies that provide Internet access from blocking or slowing content sent to homes and businesses, while allowing mobile phone companies to limit some Web traffic.

Verizon said the FCC asserted authority it didn’t have to impose “sweeping new regulation” over the U.S. telecommunications industry, which invested $65 billion in the U.S. in 2010, according to data compiled by Bloomberg. Congressional Republicans say they agree the rules, approved by the FCC on Dec. 21, go too far and that they will challenge them. Consumer advocacy groups including Public Knowledge say the rules don’t adequately protect mobile Web users.

Complaints from all sides indicate the rules may be challenged in court, where the FCC might have a tough time defending them after judges in April undermined the agency’s authority over Internet service

During the FCC’s meeting that resulted in a 3-2 Democrat party-line vote to approve the regulations, four of the five commissioners questioned the rules’ legal foundation.

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Compliance Policy

Warren Woos Community Banks, Offering Help Against Wall Street

Some community bankers, many of whom initially argued against a consumer protection agency because of concerns about unnecessary red tape, now view the bureau as a way to keep competitors in check.

Elizabeth Warren, in charge of setting up the Consumer Financial Protection Bureau, has been meeting around the country with officials from smaller banks, impressing them with her knowledge of their business model and making the case that rules forcing simpler disclosure will help them win market share from Bank of America Corp., Citigroup Inc. or JPMorgan Chase & Co., according to bankers present at the meetings.

Warren also has told the bankers she shares their goal of imposing tighter rules on their other competitors, non-bank financial firms such as payday lenders.

In exchange, the bankers said, Warren has hinted that she needs their influence on Capitol Hill if there is a push to defund the agency as Republicans take control of the U.S. House.

While Wall Street and other banks fought the creation of a consumer bureau, a series of exemptions helped ensure that the Independent Community Bankers of America, the bankers’ national trade association, didn’t oppose the Dodd-Frank regulatory law signed by Obama in July.

The law, which created the consumer agency, excludes banks with less than $10 billion in assets from its supervisory authority, though they do have to follow its regulations.

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Hungary Starts EU Term on Defensive Over Media, Tax Laws

European Union regulators rapped Hungary for potentially unfair media and tax laws, putting Prime Minister Viktor Orban on the defensive at the start of his six-month term managing the bloc’s agenda.

On Orban’s first working day of Hungary’s first EU presidency, the European Commission voiced concern that setting up a media regulator staffed by appointees of the ruling party and giving it the power to fine and shut down media outlets violates the equal-treatment principles underlying the EU.

The tax law is being investigated because it targets selected industries, commission spokesman Olivier Bailly told reporters in Brussels.

Yesterday’s censure from Brussels adds to international criticism of Orban’s government, which will chair some EU policymaking meetings and play a role in representing the 27-nation bloc on the world stage.

Neelie Kroes, the EU commissioner in charge of media and Internet regulation, sent Hungary a letter on Dec. 24 expressing doubt about the fairness of the press watchdog and its adherence to EU standards, Bailly said.

For more, click here, and click here.

India May Cap Foreign Investment in Drug Companies, Mint Reports

India’s government may introduce a cap on foreign direct investment in the pharmaceutical industry, limiting ownership to 49 percent because of concerns about overseas companies taking over local businesses, the Mint newspaper said, citing a government official it didn’t identify.

Fannie, Freddie May Rule Mortgages to 2012 as Treasury Plan Due

Treasury Secretary Timothy F. Geithner will report to Congress this month on how to rebuild the U.S. mortgage finance system amid a growing consensus that Fannie Mae and Freddie Mac won’t be dismantled anytime soon.

Though Republicans have won a stronger hand in Congress, their push to end Fannie Mae and Freddie Mac’s dominance in the mortgage market is unlikely to succeed before the 2012 elections, lawmakers and analysts said.

While some lawmakers want to end all government mortgage guarantees, Geithner has indicated he may support a limited federal role in line with proposals being circulated by banking regulators, policy shops and business groups. What unites nearly all players is the view that the housing market is too fragile at the moment to function without Fannie Mae and Freddie Mac, which own or guarantee more than half of all U.S. home loans.

Until September 2008, Washington-based Fannie Mae and Freddie Mac of McLean, Virginia, were private companies backing home mortgages with an implicit government guarantee and large portfolios of mortgage-backed securities. Billions of dollars in losses stemming from subprime mortgages pushed them to the brink of collapse. The federal government placed them in conservatorship and took almost an 80 percent stake in both.

Firms with a financial stake in the housing market are paying close attention to the debate over the future of Fannie Mae and Freddie Mac.

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Compliance Action

Bank of America Says Fed Certifies Lender Met Asset-Sales Goal

Bank of America Corp., the biggest U.S. lender, said the Federal Reserve confirmed that the company had met its goal of increasing equity by $3 billion through asset sales.

The Fed’s assent was disclosed in an e-mailed statement from the bank yesterday. The company agreed to sell assets as part of the deal to let Charlotte, North Carolina-based Bank of America exit the Troubled Asset Relief Program in December 2009.

U.S. Tax Targets Non-U.S. Contractors, Foreign Oil Companies

Without hearings and with little warning, the U.S. Congress approved a new tax on some government contracts with foreign suppliers shortly before it adjourned in December. Procurement lawyers and U.S. officials now are trying to figure out how the levy will operate and who it will affect.

The tax is part of a bill signed yesterday by President Barack Obama providing aid for workers who responded to the 2001 terrorist attack in New York. New U.S. contracts with foreign companies will be subject to a 2 percent tax if the goods or services purchased come from countries, including China, India and Brazil, that aren’t part of the World Trade Organization’s Agreement on Government Procurement.

The accord is designed to promote fair competition for public contracts. The tax’s likely targets include Middle Eastern oil companies such as Abu Dhabi National Oil Co. and the Kuwait Petroleum Corp. that sell fuel to the U.S. military overseas. The effects won’t be determined until the government writes rules for assessing and collecting the tax.

Congress included the tax in the legislation for World Trade Center responders to offset the measure’s cost.

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Deep-Water Oil Drillers Say Changing Rules Stymie Exploration

Deep-water oil exploration companies in the Gulf of Mexico say efforts to resume drilling as early as this quarter are being stymied by changing U.S. requirements for designing wells and ensuring safety following BP Plc’s Macondo spill.

Almost three months after Interior Secretary Ken Salazar ended a moratorium on drilling in seas deeper than 500 feet (152 meters), regulators have yet to issue any permits for exploration. Applications are being returned by the Interior Department for more information on how companies are meeting environmental and equipment standards imposed since the April BP disaster, according to the American Petroleum Institute.

Drilling applications are now required to show backup power sources for the blowout preventers that sit atop wellheads on the sea floor, estimate how long it would take to drill a relief well in the event of a Macondo-like disaster and assess potential environmental damage when a well blows out.

At stake is development in a region that produces more oil than the U.K., Qatar or Indonesia, and pumped $353 billion in crude in 2009. Deep-water exploratory drilling was halted after the blowout of BP’s Macondo well killed 11 workers, injured 17, destroyed Transocean Ltd.’s $365 million Deepwater Horizon rig and spewed crude for 87 days. The five-month suspension freed rigs to assist BP’s efforts to stop the worst U.S. offshore spill and let regulators reassess oversight of wells.

The stricter safety regulations that resulted may boost costs to develop deep-water Gulf discoveries by $5 a barrel, said Michael Lynch, a Gerson Lehrman Group analyst.

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Deutsche Telekom CEO Obermann Won’t Be Charged in Bribery Probe

Deutsche Telekom AG Chief Executive Officer Rene Obermann won’t be charged by German prosecutors over bribery allegations at company units in Hungary and the Republic of Macedonia.

The investigation of Obermann and two other suspects was closed because it turned up no evidence of wrongdoing, Friedrich Apostel, the spokesman for Bonn prosecutors, said yesterday in an e-mailed statement. A probe involving five other suspects will continue, he said.

The case centers on alleged bribery payments at central and eastern European units of Deutsche Telekom, Europe’s biggest phone company. Bonn prosecutors opened their own investigation after they were asked by the U.S. Securities and Exchange Commission for assistance in its probe into the matter. Obermann’s home was searched Aug. 31.

Deutsche Telekom has said that an independent investigation initiated by Hungarian unit Magyar Telekom’s audit committee revealed that sham contracts, worth about 32 million euros ($43 million), may have been used by Montenegrin and Macedonian units in 2005.

Lima Exchange to Rejoin Andean Integration on Tax Amendment

The Lima Stock Exchange said it will rejoin a project to integrate the bourses of Peru, Chile and Colombia after the government passed a tax amendment.

The amendment, which sets a 5 percent tax for local and foreign investors and eliminates earlier taxes of up to 30 percent, became law on Jan. 1, the Lima Exchange said yesterday in an e-mailed statement.

Germany Recovers From Tax Evaders, Postpones Reform, Papers Say

The German government gained 2 billion euros ($2.7 billion) in extra tax revenue last year after it bought information on citizens that held money in foreign accounts to evade tax, the Handelsblatt newspaper reported yesterday, citing government estimates.

Separately, the German government plans to postpone major parts of a reform effort to simplify tax rules, Die Welt reported, citing a government draft.

The rules, including tax breaks, won’t take effect before 2012, the newspaper said. Party leaders of the governing coalition agreed on tax cuts for 2013, Die Welt said, citing unidentified people close to the government.

SecondMarket Receives SEC Request on Pre-IPO Pools

SecondMarket Inc., which matches buyers and sellers of shares in private companies such as Facebook Inc. and Twitter Inc., received a request for information from the U.S. Securities and Exchange Commission.

Mark D. Murphy, a spokesman for the New York-based broker-dealer, confirmed the receipt of a “voluntary request” for information from the SEC regarding “pre-IPO pooled investment funds.” He said the company is “fully cooperating.”

SecondMarket’s statement is the first public confirmation that regulators are looking at stock trading in companies that have yet to go public. Facebook, Twitter and other venture-backed Internet companies have seen their combined value rise more than 50 percent since June, according to a report last month by Nyppex LLC that focused on so-called secondary transactions that involve existing shareholders.

The Wall Street Journal and New York Times reported last week that the SEC is seeking information about trading in Facebook, Twitter, Zynga Game Network Inc. and LinkedIn Corp.

Separately, Goldman Sachs Group Inc.’s plan to offer clients up to $1.5 billion in Facebook Inc. equity may invite U.S. regulators to take a closer look at whether the owner of the world’s most popular social-networking site is circumventing disclosure rules, securities lawyers said.

Goldman Sachs invested $450 million in Facebook and is planning to create a special purpose vehicle for its clients to make additional investments worth as much as $1.5 billion, according to two people familiar with the matter who spoke on condition of anonymity because the deal is private.

The investment and the plans for the special purpose vehicle were previously reported by the New York Times.

The SEC requires companies with more than 500 shareholders to increase disclosures about their finances. The rule was created to ensure sufficient information for investors and applies to companies with more than $10 million in assets. The Goldman Sachs investment values Facebook at about $50 billion.

Facebook told the SEC in 2005 that it had fewer than 500 shareholders and asked for an exemption from making public disclosures about the restricted stock units it was giving employees. The SEC granted the exemption.

For more on SecondMarket, click here.

For more about Goldman and Facebook, click here.

GE Poised for Push Into U.S. Medical-Errors Prevention Market

GE Healthcare, a unit of General Electric Co., is pushing to join a U.S. program designed to cut medical mistakes that would inject it into a $500 million market boosted by the U.S. health-care overhaul.

Within five years, the U.K.-based unit seeks to control 75 percent of the new market, said Jeff Terry, 35, the division’s managing principal for clinical excellence. GE Healthcare, with $16 billion in 2009 revenue, is already the biggest vendor for health information technology and medical-imaging equipment.

The designation of “patient safety organization,” was created by Congress in 2005. The health-care law signed in March requires hospitals with more than 50 beds to use patient safety evaluation systems in a new federal insurance program.

Patient safety organizations are designed to reduce medical errors by recording and analyzing data on mistakes and their causes so that health-care providers can prevent future mishaps. The U.S. Agency for Healthcare Research and Quality is responsible for approving the designation.

Efforts to improve patient safety intensified in the U.S. after a 1999 report by the Institute of Medicine found that medical errors caused as many as 98,000 deaths and more than 1 million injuries each year.

Under the health overhaul, large hospitals are required to participate in patient safety organizations or establish equivalent systems to join the provider networks of health plans sold on the insurance exchanges that will open in 2014.

For more, click here.


Ex-Madoff Aide Bonventre Seeks Dismissal of Charges

Daniel Bonventre, Bernard Madoff’s former operations chief, asked a judge to dismiss criminal charges against him after prosecutors began seizing assets including money he set aside to pay his lawyer.

Bonventre is among five former Madoff aides who face charges for helping their boss run a multibillion-dollar Ponzi scheme. In a court filing yesterday, Bonventre accused prosecutors of interfering with his constitutional right to counsel by seizing assets. The seizure followed four requests that he cooperate in the probe, said his lawyer, Andrew Frisch.

Bonventre was arrested in February. Late last month, prosecutors said in letters to Frisch that they were seizing Bonventre’s funds, including brokerage accounts.

Ellen Davis, a spokeswoman for U.S. Attorney Preet Bharara in New York, declined to comment.

Bonventre denies wrongdoing.

The case is U.S. v. O’Hara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

To contact the reporter on this story: Carla Main in New Jersey at

To contact the editor responsible for this report: David E. Rovella at

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