December 20, 2012
A couple of studies released in 2012 have suggested that fraud attempts aimed at both consumers and businesses were down compared to recent years, especially during the deep downturn this last decade. Such an assertion isn't one believed by fraud and risk experts, including Gary Bares, founder and CEO of Verifraud, which runs NACM's Asset Protection Group (APG) operations.
Bares said this week that long-popular schemes to defraud businesses, such as impersonating a company with a similar web address or contact information, or buying an existing company that's winding down for the purpose of using its good credit, continue to evolve. In addition, many fraudsters have gotten more proficient at avoiding what had been some of the most noticeable red flags: poor language syntax in email correspondence, and email addresses from people with non-business-related domain names (e.g., Hotmail, Gmail, or att.net). "They're trying more and more things because it's an evolution: the better companies get, the more the perps have to find new tricks," Bares noted.
Case in point: at least three NACM members have reported fraud attempts to APG in the last three weeks. In one case, the fraudsters copied the legitimate business' website coding and made a similar web address that ended in ".us" instead of ".com" to give the appearance of legitimacy. A recent email scheme obtained by APG illustrated that a request for credit on the back of a previously well-respected company no longer in operation was the 30th batch of emails sent to a list of 50 prospects each time.
"It's just a numbers game, really," said Bares. "If you send out 1500 of these where some of the wording is quite good, or they might have the banking sheets for the company they're impersonating, some companies aren't going to know. They might end up getting 10 hits. You might be surprised how many companies are getting burned by this because it falls through a crack with a new employee or they've never seen this type of attempt before or salespeople haven't been trained for this like credit people have, and have no clue. It's a reason why APG is putting out so much more now about actual companies being impersonated."
- Brian Shappell, CBA, NACM staff writer
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The U.S. Department of the Treasury announced this week that it would fully exit its investment in General Motors (GM) within the next 12-15 months.
The announcement comes as part of Treasury's continued effort to wind down its investments in the Troubled Asset Relief Program (TARP), some of the most controversial of which were its investments in the U.S. automotive industry. In 2008 and 2009, Treasury invested $49.5 billion to ensure GM's successful restructuring and to buoy the American auto industry at large.
Currently, Treasury holds 500.1 million shares of GM common stock, but as part of the agency's plan to exit its investment, GM will purchase 200 million of those shares at a rate of $27.50 per share. That transaction is expected to close before the end of the year.
Its remaining 300.1 million shares will be divested over the next 12-15 months. Treasury noted that it planned to begin its disposition of the shares as soon as next month according to the terms of a prearranged written trading plan, although the manner, amount and timing of any future sales are subject to market conditions.
Although controversial at the time, Treasury's intervention in the U.S. auto industry's troubles has been largely successful. Independent estimates have indicated that the rescue helped save more than one million jobs. Moreover, since 2009 the auto industry has added 250,000 new jobs.
"TARP was always meant to be a temporary, emergency program. The government should not be in the business of owning stakes in private companies for an indefinite period of time," said Assistant Secretary for Financial Stability Timothy Massad. "Moving to exit our investment in GM within the next 12 to 15 months is consistent with our dual goals of winding down TARP as soon as practicable and protecting taxpayer interests."
All in all, Treasury has so far recovered more than 90% of the $418 billion in funds it disbursed for TARP through repayments and other income.
- Jacob Barron, CICP, NACM staff writer
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Perhaps the most covered story internationally this year has been about the debt struggles throughout the European Union and their impact on the rest of the world. But, for this week anyway, there was a much more positive tone to coverage of the European sovereigns.
Perhaps the most shocking of all came as one of the oft-maligned U.S.-based credit ratings agencies raised the credit profile of arguably the euro zone's most troubled nation. Standard & Poor's raised Greece's sovereign credit rating by six steps to a "B-minus" and also placed it in a "stable" outlook category. It's a massive change for a nation that had been miles below an "investment grade" rating and has struggled with a negative outlook by the agency for years. In fact, the rating is the highest Greece has been given since early 2011.
S&P justified the improved rating by noting a deeper commitment to help and greater transparency therein on the part of EU member nations carried by a Germany that had dragged its feet for some time with calls for increased austerity and related concessions to mitigate risk. Meanwhile, economic news in Germany turned positive after some recent months of pessimistic attitudes that surprised the fiscal and production powerhouse.
Germany's business confidence, which in October sank to its lowest level since early 2010, increased for the second time in as many months in December, and did so by more than was forecast. Germany also experienced a noticeable bump in exports and new factory orders, as domestic companies involved in trade have found more opportunities for partnerships outside of an EU it had relied upon so heavily at one time.
Meanwhile, despite downgrades from ratings agencies for France, its yields and the spreads have actually decreased, somewhat surprisingly. The good news for France, the second largest economy among EU members, along with Greece's hopeful upgrade this week both bear a double-edged sword. France, which lost its prized "AAA"-level rating with two of the three big agencies in 2012, is a prime example of the agencies' relevance becoming somewhat muted, said New York University's Ed Altman, PhD, who will make an encore appearance at NACM's Credit Congress in Las Vegas this May.
"France, if anything, has improved in its situation [since the downgrades]," Altman told NACM. "I'm not saying markets are ignoring the ratings agencies completely, but they don't seem to be taking them too seriously in regards to investment grade countries." He added that market-watchers are aware of the agencies' perceived spotty track record from last decade and don't rely on them solely when making decisions and analysis.
- Brian Shappell, CBA, NACM staff writer
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President Barack Obama signed H.R. 6156 into law last week, officially establishing permanent normal trade relations (PNTR) with Russia.
Much of what the bill does is iterated in its full title, the Russia and Moldova Jackson-Vanik Repeal and Sergei Magnitsky Rule of Law and Accountability Act of 2012. In addition to repealing the Jackson-Vanik amendment, a regularly ignored Cold War regulation that made U.S. preferential tariff rates on Russian products conditional on the country allowing Jews and other minorities to emigrate freely, the bill also normalizes trade relations with Moldova and gives the U.S. the ability to sanction Russian human rights violators according to the terms of the bill's so-called Magnitsky provisions, named after Russian lawyer Sergei Magnitsky who was investigating allegations of large-scale theft on the part of Russian officials and died under mysterious circumstances in a Russian prison.
Normalizing trade relations with Russia became a priority once Russia officially joined the World Trade Organization (WTO) in August. According to the terms of Russia's WTO accession agreement, the country could increase tariffs on products entering the country from the U.S. until the U.S. normalized trade relations with its fellow WTO member. The presence of the Jackson-Vanik Amendment on U.S. books was considered abnormal, and Russia was, until now, within its rights to discriminate against American products.
President Obama's signature clears the bill's final hurdle and allows U.S. companies to take advantage of the newly expanded market access generated by Russia's WTO membership.
"We're gaining access to a fast-growing market, and we give up nothing in return. American businesses, workers, farmers and ranchers are now on a level playing field with their global competitors looking to capitalize on the Russian market," said Senate Finance Committee Chairman Max Baucus (D-MT), who authored an earlier iteration of the bill, and added that the bill also clears the way for trade challenges should Russia fail to abide by the terms of its WTO agreement. "With Russia in the World Trade Organization, we have new tools at our disposal to fight on behalf of American exporters."
From 2009 to 2011, U.S. exports to Russia rose by 57% and are expected to double within the next five years.
- Jacob Barron, CICP, NACM staff writer
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Just days after an eight-day port strike on the West Coast ended, it seems problems brewing on the opposite side of the country are raising concerns about the possibility of another late-year work stoppage...one that would affect many more markets.
The contract between the International Longshoremen's Association and the U.S. Maritime Alliance Ltd. is being negotiated to replace the one that expires on December 29. Getting something in place for the last port-related contract dispute that also involved the Longshoremen—in the Los Angeles/Long Beach area—resulted in some 75% of the largest U.S. port's capabilities being shut down for just over a week. Because of holiday retail-related shipping needs, some estimates noted that upwards of $1 billion in goods per day were blocked during the dispute.
A failure to forge a new deal or some type of extension would almost certainly lead to a lockout or strike in many, if not all, of the ports in Boston, New York/New Jersey, Delaware River, Baltimore, Hampton Roads, Wilmington, Charleston, Savannah, Jacksonville, Port Everglades, Miami, Tampa, Mobile, New Orleans and Houston, noted Matthew Shay, president and CEO of the National Retail Federation. Shay, who blasted both sides in the West Coast stalemate, again publicly called on the Obama Administration to intervene because of the cost at stake.
"A strike of any kind at ports along the East and Gulf Coasts could prove devastating for the U.S. economy," Shay said. "Allowing a strike to occur for even one day could have a negative impact on all of those downstream businesses and employees who rely on the ports. The U.S. economy cannot afford to wait for a strike to occur before we see administration action."
Granted, with the "fiscal cliff" issue yet unresolved on Capitol Hill, and what sounds like a renewed call for new gun control measures in the wake of the mass school shooting tragedy in Connecticut, any intercession appears unlikely in the near-term. That's especially so since the Obama Administration elected to not get involved earlier this month in California.
- Brian Shappell, CBA, NACM staff writer
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