Business Insider Online: February 2017

Saturday, February 11, 2017

Fischer Says Fed Focused on Goals Amid Trump Policy Uncertainty – Bloomberg

Federal Reserve Vice Chairman Stanley Fischer defended post-crisis U.S. banking reforms that Donald Trump's administration wants to undo and said the central bank is focused on its dual mandate for inflation and jobs amid "significant uncertainty" on fiscal policy.

"I don't think anyone quite knows what's going to come out of the process which involves both the administration and Congress in the deciding of fiscal policy and a variety of other things.,"' Fischer said in response to audience questions at a conference Saturday in Coventry, England. "At the moment we are going strictly according to what we see as our responsibility according to law."

Photographer: Andrew Harrer/Bloomberg

Fed officials, who raised interest rates by a quarter percentage-point in December, have given no indication on the timing of their next hike in response to slow but continuing improvements in the U.S. economy. The Federal Open Market Committee meets next on March 14-15, when investors see a 28 percent chance policy makers will increase rates, based on prices in federal funds futures contracts.

Though some Fed officials have argued March should be on the table for a possible move, recent economic data has not created any sense of urgency in the debate. While employers continued to add jobs at a healthy clip, U.S. unemployment edged up in January to 4.8 percent while wages rose only modestly. Excluding food and energy, prices rose 1.7 percent in the 12 months through December, according to the Fed's preferred gauge of inflation.

'Nearly There'

"We're very nearly there. There could be a further somewhat strengthening in the labor market — and to get inflation to 2 percent," Fischer said.

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Officials projected three quarter-point rate increases this year, according to the median of their quarterly estimates in December; up from the two moves they had forecast three months earlier. That was partly in response to steady progress toward the Fed's goals of 2 percent inflation and full employment. Some officials also began incorporating into their outlook assumptions about pro-growth policies likely to be proposed by the then-incoming Trump administration.

Since then, however, the White House has provided no clear details about what measures it plans it intends to bring to Congress on taxes, spending, regulatory reform or other steps aimed at boosting the economy. That has left Fed officials, and investors, with a heightened degree of uncertainty over the likely path of rates this year and next.

"We don't want to put in very clear expectations when I don't think they exist in the policy making apparatus yet," Fischer said.

Yellin Testifies

Fed Chair Janet Yellen is scheduled to testify before U.S. lawmakers Tuesday and Wednesday in Washington where she is expected to keep the Fed's options open on the timing of the next hike.

Fischer was also asked about the future of the sweeping post-crisis banking reforms of the 2010 Dodd-Frank Act that President Trump has said is holding back small businesses and must be undone.

"I don't think that the Dodd Frank act as a whole is going to be repealed. There may be some adjustments to it," he said. "There are many aspects that are extremely important. Significantly reducing the capital requirements would reduce the safety of the system and we certainly hope it's not going to happen, particularly for the big banks."

Trump's ability to reshape central bank oversight of Wall Street was improved Friday by the news that Fed Governor Daniel Tarullo will step down in early April. Tarullo has been the Fed's key official on banking and his departure will give the White House an opportunity to fill three of the seven seats on the Fed Board in Washington, where there are already two existing vacancies.

Former AIG Executives Reach Settlement in Accounting Fraud Case – New York Times

After negotiations spanning about two months, the settlement was a quiet conclusion to a case that began during an era when Mr. Spitzer extracted large fines after accusing Wall Street research analysts of publishing biased research, mutual fund managers of shady trading and insurance brokers of rigging bids and receiving kickbacks. The Enron and WorldCom accounting frauds had shaken corporate boards.

But Mr. Greenberg was determined to fight his case, and both sides dug in for a long battle. Neither Mr. Greenberg nor Mr. Spitzer have the same jobs they had in 2005, having receded from those prominent roles.

The trial began in September before New York State Supreme Court Justice Charles E. Ramos after 11 years of delays and legal maneuvering, much of it as Mr. Greenberg appealed rulings by the judge. After his testimony and cross-examination in the trial, Mr. Greenberg and the lawyers arguing for the state began mediation in December. The trial had been set to resume last month, but was postponed pending the talks.

The former executives were accused of overseeing two sham reinsurance deals aimed at duping A.I.G. investors. One deal turned auto warranty insurance losses into investment losses; the other inflated A.I.G. reserves by $ 500 million. The charges led to Mr. Greenberg's ouster in 2005 as chief of A.I.G., which he had built into a global insurance leader.

In a statement on Friday, Mr. Schneiderman said, "Today's agreement settles the indisputable fact that Mr. Greenberg has denied for 12 years: that Mr. Greenberg orchestrated two transactions that fundamentally misrepresented A.I.G.'s finances."

In his statement, Mr. Greenberg said he "initiated, participated in and approved these two transactions"; as a result, A.I.G.'s public filings "inaccurately portrayed the accounting, and thus the financial condition and performance for A.I.G.'s loss reserves and underwriting income."

In an interview, David Boies, Mr. Greenberg's lawyer, called the agreement a "nuisance settlement," noting that Mr. Greenberg had avoided two penalties sought by the state that would have barred him from working in the securities industry or as an officer of a public company. The settlement's outline was framed by the mediator, Kenneth R. Feinberg.

The transactions were featured when A.I.G. settled accounting fraud charges brought by the Securities and Exchange Commission in 2006. One, a reinsurance deal between A.I.G. and General Reinsurance Corporation, a company owned by Berkshire Hathaway, prompted federal criminal charges in Connecticut against several former executives of the companies; two former Gen Re executives pleaded guilty. A 2008 jury verdict against five others was overturned on appeal.

What began as a Spitzer-Greenberg battle was nasty from the start. Before he brought the charges in May 2005, Mr. Spitzer had forced the ouster of Mr. Greenberg's son Jeffrey as chief executive of the insurance brokerage Marsh & McLennan after charging it with bid-rigging and receiving kickbacks. And Mr. Greenberg complained that Mr. Spitzer was treating minor infractions, like "foot faults" in tennis, as capital crimes. Mr. Spitzer shot back, "too many foot faults, and you can lose the match."

Early in the trial, Mr. Greenberg admitted to a sometimes active role in formulating the transactions at issue but insisted he had intended for them to comply with accounting rules. He said he had left most details to subordinates.

On the stand, he lunged and parried with state trial lawyer David E. Nachman, avoiding simple answers so often that the judge chided him. "If we don't want this trial to last a year, you're going to have to give direct answers," Judge Ramos said.

In his opening statement, Mr. Boies said, "this case is devoid of any admissible evidence that ties Mr. Greenberg to anything that was improper about these two transactions."

Saule Omarova, who specializes in the regulation of financial institutions as a professor at Cornell Law School, said the case was about the legacies of Mr. Greenberg as A.I.G.'s longtime leader and Mr. Spitzer as a onetime prominent Wall Street regulator.

Stepping back, she said, the case is a prominent example of regulators' efforts to untangle the blame for "risk-creating activities at large financial conglomerates" that later loomed large in the financial crisis of 2008.

Three years after the charges led to Mr. Greenberg's ouster, A.I.G. nearly collapsed and needed an $ 185 billion federal rescue. Mr. Spitzer resigned as New York governor in 2008 in a prostitution scandal.

The state and the two defendants had reached an agreement to settle the case just before A.I.G.'s near-collapse. However, a steep drop in A.I.G.'s stock price at that time reduced the value of a planned charitable donation of A.I.G. shares that would have been part of the settlement, and the agreement was called off.

Before the trial, Judge Ramos ruled in favor of the state on one of the charges, but that was overturned on appeal, and the defense unsuccessfully sought to remove him from the case.

In the Gen Re deal struck in 2000, the company was supposedly paying $ 10 million to get reinsurance from A.I.G., according to testimony by Christian M. Milton, a former A.I.G. executive. But A.I.G. arranged to repay the $ 10 million to Gen Re with a $ 5 million deal fee, he testified.

The state charged that the "secret" fee repayment was a sign the reinsurance was bogus, intended mainly to allow A.I.G. to increase reserves by $ 500 million. But Mr. Greenberg, who initiated the deal by phoning the Gen Re chief executive, testified that he was not aware of the repayment plan.

In a 2008 deposition admitted into evidence early in the trial, Alice Schroeder, a former Morgan Stanley insurance analyst, said that if she had known about the Gen Re transaction and its impact in raising A.I.G.'s then-faltering reserve levels, she "almost certainly" would not have upgraded the stock in early 2001. She also described Mr. Greenberg as "a very hands-on manager."

One cloud over the state's case was whether a deposition of Richard Napier, a former Gen Re executive, could come into evidence. Mr. Napier was an important prosecution witness in the Connecticut trial who in 2005 pleaded guilty to conspiring to commit securities fraud in the A.I.G. deal.

While the defense objected to parts of Mr. Napier's deposition as inadmissible "hearsay," New York State lawyers argued that a "co-conspirator exception" to hearsay rules should apply. Judge Ramos received briefs on the issue but had not ruled before the mediation effort began.

Continue reading the main story

When fleeing Detroit was in vogue, iconic Mike Ilitch dug in and stayed – MLive.com

This is an opinion piece by MLive.com columnist David Mayo.

It was the dispiriting 1980s in Detroit, when the city’s roads led one way, out. Investment in the city deteriorated. The population dwindled and the tax base shriveled. Buildings were crumbling.

That’s when Mike Ilitch came back.

The Detroit native bought and revamped Fox Theatre, then moved his burgeoning Little Caesars empire from Farmington Hills into the building. Detroit wasn’t the place to be, it was the place to be from. It was 1988 and no one was doing what Ilitch, who then owned the Detroit Red Wings, and soon would turn them into the National Hockey League’s dominant force, was doing.

Ilitch moving his business holdings into downtown Detroit was held up for its symbolism, though it was more than just symbolic.

Ilitch was of Detroit, and ultimately wanted to be in Detroit.

The city and the businessman forged a mutually beneficial relationship and Ilitch got a lot of tax incentives along the way, but the role he played in revitalizing downtown Detroit, creating one of the most vibrant sports and entertainment sectors of any city in the nation, and becoming one of the great team owners in sports history, were undeniable.

Ilitch, the owner of the Red Wings and Detroit Tigers, who took over as custodian of those franchises when they were rudderless and drawing little fan interest and turned both into powerhouses with new home facilities, died Friday at 87.

The man of working-class roots who opened a pizza shop in 1959 in Garden City, and grew it into the international Little Caesars chain, made a tremendous impact on the restaurant industry and his hometown, where he stayed and invested.

Pizza mogul Mike Ilitch dead at 87

As an owner, Ilitch was beloved like none other in Detroit history, not for his boisterousness or candor — he seldom said much about his clubs — but because he delivered. He restored luster to two franchises and oversaw construction of new playing facilities for both.

Ilitch bought the Red Wings in 1982, when they were non-contenders and fans largely had abandoned them. He bought the Tigers in 1992, when the franchise was a wreck, playing in a cherished dungeon where free agents dared not roam, with a minor-league system adjudged the worst in baseball.

The new owner endured years of losing with both franchises. But he understood the core tenet of sports franchise ownership: The primary job is to monitor the front office and demand some level of fiscal responsibility, then be willing to scrap that and write a big check when opportunity strikes, which Ilitch did when his financial extravagance could position the Red Wings and Tigers to win.

The Red Wings won the Stanley Cup under Ilitch in 1997, 1998, 2002 and 2008, when his ownership commitment to winning was forged.

He never saw the Tigers win it all on his watch, which was the former minor-league shortstop’s dream, though he did seem them play in the World Series twice.

He never saw the final product of what will become Little Caesars Arena, the newest downtown jewel, with financing he structured.

His vision lives on in all of it, for decades to come.

Ilitch was much closer to the everyman than the modern sports owner who pursues the spotlight. He did not like interviews and would not be found in the clubhouse during open media periods. He occasionally would surprise beat writers with a round-table appearance, so that everyone had access to the same information simultaneously, but even those became much less common in recent years.

Ilitch always had passion for sports

The fates of the Tigers and Red Wings will be determined in the weeks ahead. Ilitch’s wife, Marian, is owner of MotorCity Casino, and Major League Baseball expressly prohibits any team owner or official from holding ownership or operating stake in a casino. Two days before Ilitch’s death, commissioner Rob Manfred said MLB is open to reexamining its hardline stance against gambling, but major policy change isn’t coming before the Tigers’ ownership transition must be resolved.

But for now, Detroit mourns the loss of an icon.

The Red Wings and Tigers are staples of Detroit and Ilitch offered them a steady hand in ownership, for 35 years and 25 years, respectively.

He wanted to be a Tiger, turning two on the infield, but ended up a mogul pitching “Pizza! Pizza!” and the two-for-one special that proved a concoction of dough, sauce and cheese didn’t have to break a family budget.

Ilitch reinvested in the city where he grew up, where he attended Cooley High School and starred on the sports teams before toughening up four years in the Marine Corps. His first pizza parlor was on the city’s west side. Ilitch’s riches were created of his own sweat-equity willingess to work in the flour dust alongside his employees. He operated his business soundly and it grew locally first, then regionally, then nationally, then internationally.

He poured his efforts and energy right back into his home base, right back into the place from which he came.

Ilitch was of Detroit. He let the world know it, even when that wasn’t in vogue. The city benefited from his presence and he built champions in the place he championed. In the end, everybody won.

Billionaire Little Caesars Pizza founder, sportsman Mike Ilitch has died at 87 – MLive.com

DETROIT, MI – Little Caesars Pizza founder Mike Ilitch, the billionaire sportsman and champion for Detroit, died Friday at an area hospital.

He was 87.

“My father was a once-in-a-generation entrepreneur, visionary and leader, setting the tone for our organization and our family,” his son and Ilitch Holdings Inc. President and CEO Christopher Ilitch said in a statement. “He made such a positive impact in the world of sports, in business and in the community, and we will remember him for his unwavering commitment to his employees, his passion for Detroit, his generosity to others and his devotion to his family and friends.”

Ilitch was a long-time owner of both the Detroit Red Wings and the Detroit Tigers.

He started Little Caesar’s Pizza – famous for its HOT-N-READY pizza and Crazy Bread – in 1959 with his wife of 61 years Marian Ilitch in Garden City, and what it became tells a classic American story of great achievement sprung from humble roots.

Ilitch was born in 1929 in Detroit to Macedonian immigrants, served as a U.S. Marine, and worked as a door-to-door salesman until he earned enough money for the first restaurant, according to the statement. The world’s largest carryout pizza chain now has locations in 20 countries as far-flung as Egypt and Honduras. It employs 23,000 people and posted $ 3.4 billion in revenues last year.

His subsequent success allowed him to invest in food, sports and entertainment, and take on charitable causes, such as the Little Caesars Love Kitchen, a veterans program and the Little Caesars Amateur Hockey Program.

“Mike Ilitch was more than just a shrewd, successful businessman. He was a Detroiter through-and-through,” Mayor Mike Duggan wrote in a statement. “Whether he was making pizza, building successful sports and entertainment franchises or supporting youth organizations in our city, ‘Mr. I’ helped to bring thousands of jobs and opportunities to our city and attract millions of dollars of investment.”

His influence in Detroit has been especially visible in recent years. A Wayne State University business school bearing his name is set to open in 2018, thanks to a $ 40 million Ilitch donation – announced at his last prominent public appearance in October 2015 – and a new hockey facility is under construction.

The Red Wing’s $ 733 million Little Caesars Arena is to host its first game this fall.

Ilitch bought the Red Wings in 1982 from Bruce Norris for $ 8 million, and Ilitch turned it into one of the NHL’s best with Stanley Cup championships in 1997, 1998, 2002 and 2008.

He was a free-spending owner who constantly pursued top free agents. Detroit, among the worst teams in the NHL throughout the 1970s and ’80s, soon became a destination for top talent. The Red Wings’ 25-year playoff streak is the longest current run in the four major pro sports.

Ilitch also had a passion for baseball, spending four seasons as a minor league baseball player – including a stint in the Tigers organization – before launching his business career.

Ilitch purchased the Tigers in 1992 from Tom Monaghan, transforming the franchise from also-rans into World Series contenders by acquiring stars such as Ivan Rodriguez, Magglio Ordonez and Miguel Cabrera. The team reach the World Series in 2006 and 2012 but lost both times.

In 2000, the Detroit Tigers moved into Comerica Park across Woodward Avenue from the downtown Detroit Fox Theatre, followed two years later by the Lions’ adjacent Ford Field.

Ilitch also has owned the Detroit Caesars, a professional men’s softball team, and the Detroit Drive of the Arena Football League.

After purchasing and renovating the theater, Ilitch moved Ilitch Holdings into the building. He began acquiring property around the theater, including multiple parking lots and vacant buildings.

In September, crews broke ground on a nine-story downtown Detroit building to be the new home of Little Caesars corporate offices. Just south of the new arena, it is to connect to the theater via a skywalk.

This is part of District Detroit, a 50-block mixed use development and contains the site of the future business school.

The project is to continue under the leadership of Christopher Ilitch, the couple’s second-youngest child, according to the Ilitch Holdings statement.

“It’s always been my dream to once again see a vibrant downtown Detroit,” Mike Ilitch said in 2012, when he unveiled his ambitious plan to build the new Red Wings arena with ancillary development from his Foxtown properties into Cass Corridor.

A proposal that called for $ 250 million in taxpayer contributions, ultimately approved by the state legislature, Detroit City Council and the Downtown Development Authority, was controversial but it brought with it a promise of $ 200 million in area investment.

“From the time we bought the Fox Theatre, I could envision a downtown where the streets were bustling and people were energized,” he said in 2012. “It’s been a slow process at times, but we’re getting there now and a lot of great people are coming together to make it happen. It’s going to happen and I want to keep us moving toward that vision.”

Ilitch is survived by his wife, seven children, 22 grandchildren and three great-grandchildren.

More than all he accomplished, he was a family man, Duggan said. “I know how Mike Ilitch adored his family and how his family adores him.”

As part of a succession plan to keep the Ilitch companies family-owned, Christopher Ilitch is to succeed his parents at the helm of Little Caesars, Olympia Entertainment and Olympia Development.

“Together my family and the company celebrate the tremendous man he was, and we will continue to work hard to uphold his remarkable legacy,” Christopher Ilitch said in the statement. “I’m honored to have had the opportunity to work with him to nurture and grow our businesses, but mostly, I’m grateful to have called him my dad, and I know my siblings feel the same.”

The family intends to have a private funeral service.

An opportunity for the public to pay their respects is being planned. Details are soon to be announced.

Friday, February 10, 2017

Chris Ilitch now in charge of dad’s empire under succession plan – Detroit Free Press

MIKE ILITCH, LEGENDARY SPORTS OWNER, PIZZA MAGNATE DEAD AT 87Remembering Mike Ilitch | 1:03

Mike Ilitch's success made him one of the best known people in Michigan. Detroit Free Press

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MIKE ILITCH, LEGENDARY SPORTS OWNER, PIZZA MAGNATE DEAD AT 87Detroit Red Wings, Tigers owner Mike Ilitch dies at 87 | 0:54

Mike Ilitch, owner of the Detroit Tigers and Red Wings and founder of Little Caesars, died at the age of 87. USA TODAY NETWORK

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MIKE ILITCH, LEGENDARY SPORTS OWNER, PIZZA MAGNATE DEAD AT 87Our last interview: Ilitch not worried about spending for Tigers | 0:25

On Nov. 30, 2015, Tigers owner Mike Ilitch made his last public comments about his team after signing pitcher Jordan Zimmermann. Video by Anthony Fenech/DFP

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MIKE ILITCH, LEGENDARY SPORTS OWNER, PIZZA MAGNATE DEAD AT 87Detroit shuttle bus driver reacts to death of Mike Ilitch | 0:52

Rich Sanchez, 66, of Detroit, a shuttle bus driver for Tommy’s bar, called Mike Ilitch “The Godfather of Detroit.” Ann Zaniewski/Detroit Free Press

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MIKE ILITCH, LEGENDARY SPORTS OWNER, PIZZA MAGNATE DEAD AT 87Mike Ilitch: Tigers’ Victor Martinez a special guy | 1:53

The Tigers owner is glad to have the designated hitter back in Detroit. Video by George Sipple, DFP.

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Remembering Mike Ilitch
Detroit Red Wings, Tigers owner Mike Ilitch dies at 87
Our last interview: Ilitch not worried about spending for Tigers
Detroit shuttle bus driver reacts to death of Mike Ilitch
Mike Ilitch: Tigers’ Victor Martinez a special guy

(Left to right) Christopher Ilitch and Marian Ilitch listen as Mike Ilitch speaks during a 2015 press conference announcing their $ 40 million donation to build the Mike Ilitch School of Business at the McGregor Memorial Conference Center on the Wayne State University campus in Detroit(Photo: Ryan Garza, Detroit Free Press)Buy Photo

Christopher Ilitch now heads the Ilitch family’s pizza, sports and entertainment business empires under a formal succession plan announced last year.

The plan specified that Chris Ilitch, 51, who is president of CEO of the family’s holding company — Ilitch Holdings — is to succeed both of his parents in their respective roles upon their deaths.

That means Chris Ilitch — the sixth of Mike and Marian Ilitches seven children — will now officially run the Detroit Tigers and the Detroit Red Wings while overseeing the other companies in the family’s portfolio, including Little Caesars Pizza, Olympia Entertainment and Olympia Development.

“Chris has done an outstanding job, and under his leadership, we have seen sustained growth and success,” Mike Ilitch said when the plan was announced last May.

A statement released late Friday by Ilitch Holdings reaffirmed that all of the family businesses will stay headquartered in metro Detroit.

Marian Ilitch continued to run Detroit’s MotorCity Casino Hotel at the time of the succession plan’s announcement, and by all indications that’s still the case. Mike Ilitch was never involved in the casino because Major League Baseball rules prohibit interests in gambling enterprises while owning a team.

One unanswered question regarding the succession plan is how Chris Ilitch could hold both the Tigers and the casino once his mother dies.

Mike and Marian Ilitch together were among the wealthiest people on the planet with an estimated net worth of $ 6.1 billion, according to Forbes.com.

The Ilitch family is now undoubtedly hoping it will avoid the sort of estate problems that bedeviled heirs of the late billionaire William Davidson, who had owned Auburn Hills-based Guardian Industries as well as the Detroit Pistons, the WNBA’s Detroit Shock and NHL’s Tampa Bay Lightning.

Davidson, who died at age 86 in March 2009 with a net worth estimate of over $ 3 billion, had trusts drawn up for his wife, their children and grandchildren worth tens of millions of dollars each.

But the Internal Revenue Service surprised the family with a 2013 claim that over $ 2.7 billion was still due because of underpayments in estate taxes, gifts taxes, penalties and more. That amount was reportedly more than 10 times what the estate’s accounting firm, Deloitte Tax LLP, initially calculated and paid, according to media reports.

Bill Davidson in a 2006 photo (Photo: KIRTHMON DOZIER, Kirthmon Dozier, Detroit Free Pr)

The family disputed the claim and the IRS ultimately settled with Davidson’s estate in 2015 for an additional tax payment of about $ 457 million.

Davidson’s estate then sued Deloitte Tax LLP, claiming that the firm recklessly botched the estate planning. The New York Supreme Court dismissed the case last year.