Finance Blog number 1

European Central Bank officials voted Thursday to hold interest rates steady, even as the euro area economy slides towards recession. But ECB president Mario Draghi appeared to hint that there could be rate cuts in the future.

In a widely expected move, the ECB left its main overnight lending rate at 1%, a level the bank has maintained since late last year.

The Governing Council of the Frankfurt-based ECB met in Barcelona as the economic outlook in the eurozone has deteriorated.

Speaking to reporters after the meeting, Draghi said the ECB’s policies remain "accommodative" in light of the economic data from the first quarter. But he acknowledged that more recent economic indicators highlight the uncertain outlook for the eurozone.

Draghi noted that economic activity was "stabilizing" in the first quarter but that more recent data shows "uncertainty prevailing."

While he stressed that interest rates are very low and liquidity is abundant, Draghi said several times that "any exit strategy remains premature." ECB policymakers will be "clearer in our assessment" at the council’s next policy meeting in June, he added.

"The ECB does appear to be leaving the door open to an eventual further interest rate cut," said Howard Archer, chief UK and European economist at IHS Global Insight.

But monetary policymakers will probably not act until economic conditions have deteriorated further, according to Archer. "Unfortunately that could very well happen," he added.

Europe: ‘Dark clouds on the horizon’

Meanwhile, the ECB is under pressure to intervene in financial markets as investors have been rattled by renewed concerns about the euro debt crisis.

In response to a question on the ECB’s controversial bond buying program, Draghi simply said the so-called securities market program, under which the ECB purchased billions of euros worth of government debt last year, is "an important instrument."

But he stressed that eurozone governments still need to reduce debt and take steps to increase economic competitiveness.

"These mechanisms are useful, but they cannot replace either fiscal consolidation or structural reforms as the way to go back to stability," said Draghi guaranteed personal loan approval.

The ECB has taken unprecedented steps to support the economy.

In two separate operations, the ECB funneled more than 1 trillion euros worth of ultra low-cost loans into the banking system starting late last year. The two long-term refinancing operations, or LTROs, helped prevent a credit crunch in the banking system.

The LTROs also appeared to drive down borrowing costs for troubled euro area governments including Italy and Spain. But the effects of the lending program have waned and some investors are now calling for the ECB to do more.

Spain, for example, confirmed earlier this week that it officially slipped back into recession in the first quarter. Meanwhile, unemployment in the 17-nations that use the euro edged up to 10.9% in March — the highest level since the common currency was introduced in 1999.

In addition to Spain, several other eurozone economies already struggling with recession including Italy, Ireland, Greece and Portugal.

Eurozone unemployment hits record 10.9%

Overall, the eurozone economy is widely expected to suffer a mild recession this year as austerity — budget cuts and tax hikes — take a toll on growth.

The bleak economic climate has raised concerns that austerity is doing more harm than good, and a growing number of policymakers have been calling for reforms to boost economic growth.

For his part, Draghi seemed to suggest that policymakers need to do both.

"We have to put growth back at center of agenda without any contradiction to the need to preserver in fiscal consolidation," said Draghi.

He supported calls for a "growth pact" to compliment the "fiscal pact" that euro area leaders signed late last year.

Draghi said the growth pact should emphasize polices aimed at opening up eurozone labor and product markets to increased competition. At the same time, Draghi said targeted spending on infrastructure projects will help create jobs in the public sector.

"We need a common European discipline in doing these reforms," he said.  

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Apple Inc. risks losing the right to use the iPad trademark in China, a senior official suggested Tuesday, as a Chinese court was seeking to mediate a settlement between the technology giant and a local company challenging its use of the iPad name.

Yan Xiaohong, deputy director of the National Copyright Administration, told reporters in Beijing that the government regards Shenzhen Proview Technology as the rightful owner of the trademark for the popular tablet computers. His remarks could add to pressure on Apple to find a solution to the standoff.

Yan’s comments followed news that the Guangdong High Court in southern China is seeking to arrange a settlement in the case. In late February, the court began hearing Apple’s appeal of a lower court ruling that favored Proview in the trademark dispute.

“The dispute between Apple and Shenzhen Proview concerning the iPad trademark is going through the judicial process,” Yan said in a news conference carried on the Internet.

But he added that “according to our government’s laws, Shenzhen Proview is still the lawful representative and user of the trademark.”

China has sought to showcase its determination to protect trademarks and other intellectual property, but with hundreds of thousands employed in the assembly of Apple’s iPhones and iPads is unlikely to want to disrupt the company’s production and marketing in China.

Ma Dongxiao, a lawyer for Proview said the company had expected all along to settle with Apple, with the key sticking point being the amount of money involved.

“It is likely that we will settle out of court. The Guangdong High Court is helping to arrange it and the court also expects to do so,” Ma said in a phone interview.

Court officials contacted by phone said they were not authorized to comment on the issue to foreign media.

“Given the wide implications of this case we need to wait to see the final ruling of the court, which will decide the ownership rights for the trademark,” Yan said. “We will proceed with the case in a prudent manner.”

He said commercial authorities that had received complaints about Apple’s use of the iPad trademark were collecting evidence.

“Once the ruling emerges we will handle the case according to the evidence we have,” he said.

Chinese courts often try to mediate agreements out of court. But it is unclear whether Apple is open to that option.

Proview, a financially troubled maker of computer displays and LED lights, says it registered the iPad trademark more than a decade ago. Apple says Proview sold it worldwide rights to the iPad trademark in 2009, though the registration was never transferred for China.

Proview’s other worldwide trademarks for the iPad name were owned by another subsidiary of the Proview Group, Taiwan-based Proview Electronics. But the mainland China trademark was registered by Shenzhen Proview.

An Apple spokeswoman, Carolyn Wu, said the company had no new comment on the possibility of a settlement with Proview.

In a statement, Apple reiterated its earlier insistence that it would never “knowingly abuse someone else’s trademarks.”

The statement adds that Proview “still owe a lot of people a lot of money, they are now unfairly trying to get more from Apple for a trademark we already paid for.”

___

Researcher Fu Ting contributed to this report.

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President Barack Obama is returning to his familiar agenda of righting the U.S. economy and winning a second term, wrapping up three days of Latin American summitry that yielded mixed results and were clouded by a Secret Service scandal.

Domestic issues are immediately on tap, with the Senate scheduled to vote Monday on Obama’s proposal to increase taxes on millionaires. The proposal stands little chance of passing Congress, but Obama has cast it as an election-year theme as he seeks to paint sharp contrasts between himself and his likely Republican challenger, Mitt Romney.

Obama returned to Washington late Sunday with a key free trade deal with Colombia ready to be fully enforced next month and with important face time with Latin American leaders that cannot hurt his diplomatic outreach.

But the weekend trip to Cartagena, Colombia, for the sixth Summit of the Americas also underscored old and new fissures that exist between the United States and its southern neighbors, from the U.S. isolation of Cuba to calls by some Latin American leaders to defang the violent drug cartels by legalizing drugs.

The trip was clouded by unseemly allegations against Secret Service personnel and military service members working on security in Cartagena ahead of Obama’s arrival. Obama, at a press conference in Cartagena, said that if the accusations, proved true “of course I’ll be angry.”

The Secret Service sent 11 agents home and placed them on leave for misconduct as the agency investigates what happened. Five members of the military working with the Secret Service were confined to quarters, pending an investigation into an alleged prostitution scandal.

“I expect that investigation to be thorough, and I expect it to be rigorous,” Obama said. “We are representing the people of the United States, and when we travel to another country, I expect us to observe the highest standards.”

The story could also be kept alive in Congress where at least one Republican committee chairman suggested the scandal may not be an isolated incident.

Obama began moving forward to domestic issues even as he was still wrapping up business in Cartagena. At the news conference, with Colombian President Juan Manuel Santos at his side, Obama mounted a vigorous defense of his tax proposals.

“I want everybody to remember, I’m going to say this repeatedly: This is not an argument about taking from A to give to B. This is not a redistributionist argument that we’re making. We’re making an argument about how do we grow the economy so that it’s going to be prospering in this competitive 21st century environment,” Obama said.

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UPDATED throughout at 7 p.m. 

ST. CHARLES • The former president of US Fidelis, once one of the nation’s largest sellers of auto service contracts, admitted in court here Thursday that he bilked consumers and looted his own company of millions of dollars.

Darain Atkinson pleaded guilty to state charges of insurance fraud, stealing and unlawful merchandising practices. It was part of a deal negotiated without the knowledge of his co-defendant and brother, Cory Atkinson, the latter’s lawyers said.

After that agreement in St. Charles County Circuit Court was announced, federal prosecutors in St. Louis unsealed an indictment accusing both men of defrauding consumers, failing to pay taxes and using more than $71 million from the company to fund a lavish lifestyle of luxury boats, cars and mansions here and overseas.

Prosecutors recommended a sentence of eight years for Darain Atkinson on the state charges. Sentencing was set for July 16, but won’t happen until after the federal case is resolved, his attorney, Scott Rosenblum, said in court.

Later, Rosenblum said the prison term and any penalty in the federal case likely would run concurrently, resulting in no more than eight years total.

It marked one more step in a dramatic fall for the Atkinsons. Just three years ago, the brothers were self-made millionaires with palatial homes, fleets of exotic cars and more than 1,100 employees working at the Wentzville headquarters of the auto service contract company they founded.

Bill Margulis, one of the lawyers representing Cory Atkinson, the former company vice president, reacted to the plea agreement by saying, “Whatever allegations in there pertain to Cory, Cory denies.” Margulis declined to comment on the tax charges, saying another lawyer was handling those.

Asked about Darain Atkinson’s motivation to plead guilty, Margulis responded, “I can only speculate that he made a decision … that eight years was a lot better than whatever the alternative might be.”

Lawyers on both sides said that Darain Atkinson did not agree to testify against his brother or provide information against him.

Cory Atkinson’s state case is pending, with a trial set for September.

Darain Atkinson has prior convictions — in 1986 for theft, burglary and forgery, and in 1987 for making counterfeit federal reserve notes. Cory Atkinson has a 1987 felony conviction for trespassing.

As part of Thursday’s plea, 11 state charges against Darain Atkinson were dropped.

“He’s done everything he can not only to accept his responsibility, he’s surrendered everything he’s owned to make things good,” said Rosenblum.

Appearing in court in a black suit, blue shirt and striped tie, Darain Atkinson provided polite and brief answers Thursday to questions from Circuit Judge Jon Cunningham and attorneys. He remained free on bail and walked away from the courthouse without speaking to reporters.

The federal indictment makes many of the same allegations outlined in Darain Atkinson’s plea, using similar language.

It also accuses both brothers of failing to declare or pay taxes on more than $40 million received from the company for the tax years 2006 and 2007. On his 2007 tax return, Darain Atkinson reported $73,378 in taxable income when he’d received $8.1 million from Fidelis, the indictment says. That return was the only one for those years on which either brother reported a positive taxable income, it says.

The federal charges also say the brothers’ lavish spending drained an escrow account that was supposed to pay taxes.

Fidelis was a broker for service contracts that promised financial protection for drivers after their vehicles’ original warranties expired. It also sold product warranties, coverage conditioned upon the purchase and use of certain auto additives.

In his plea, Darain Atkins admitted that the profit was often more than $1,200 on a contract typically priced at more than $2,000.

The company used deceptive and misleading direct mail and telemarketing campaigns designed to fool consumers into thinking they were talking to dealers or auto manufacturers, and portrayed service contracts as more comprehensive than they actually were, the plea says.

Unhappy customers canceled, sometimes at a rate as high as 60 percent.

When they did, Darain Atkinson told Fidelis staffers to arbitrarily withhold 10 to 40 percent of their money — and Cory Atkinson knew the full amounts of refunds were not being returned, the plea says.

The Atkinsons funneled millions of dollars into multi-million dollar homes in St. Charles County and elsewhere in Missouri as well as Lake Tahoe and the Cayman Islands.

Although it is not mentioned in the plea, the company paid almost $27 million to buy land and build Darain Atkinson’s Lake Saint Louis home, which featured a observation tower, bowling alley, beauty salon, a two-story walk-in closet, safe rooms, and secret doors and passageways.

Cory Atkinson’s Wentzville manse was valued at $10 million.

The founders’ spending and the customer cancellations put a strain on the company’s cash flow, and Fidelis was forced to rely on cash from new sales, the plea says. The company collapsed in 2009.

Last month, in a proposed settlement filed in bankruptcy court in St. Louis, the company agreed to pay $1.45 million to 556 former employees.

Missouri Attorney General Chris Koster, who represented the state in Thursday’s case, said after the hearing that since the Atkinson indictment in June, his office has received fewer complaints about other vehicle service contract providers.

“I think the indictment of US Fidelis sent a shock wave through this industry,” he said.

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Hewlett-Packard is shaking up its business yet again, combining its printer and personal computer divisions. One of HP’s longest-tenured and most-admired executives is retiring as a result.

HP’s printing group was once its shining star, returning ridiculously high profit margins on ink cartridge sales. But that business stagnated over the past decade and particularly slumped in the last few years. HP’s printing profit fell 10% last year as sales remained flat.

The holiday season was particularly tough. Ink sales fell 6%, office printers fell 5% and consumer printer sales tumbled 15% in the company’s fiscal first quarter, which ended in January.

As it lumps printers and PCs together, HP (, Fortune 500) said that imaging and printing group chief Vyomesh "VJ" Joshi was stepping down. Joshi, the division’s leader for the past decade, served in various roles at HP throughout his 32-year career there. His tenure dates back to the golden years of "Bill and Dave," when Bill Hewlett and Dave Packard still had active roles at the company they founded.

"VJ embodies the spirit of HP and his impact on the company has been tremendous," HP CEO Meg Whitman said in a written statement. "We wish him the very best as he embarks on a new chapter in his life."

After Ann Livermore stepped down as HP’s enterprise chief last year, Joshi was the last remaining top HP executive to have ties to the Bill and Dave era. He is well-respected throughout the industry and had long been considered a superstar executive.

Joshi was forced off of Yahoo (, Fortune 500)’s board in that company’s shakeup last month. He had been a Yahoo director for seven years.

The merging of the printing and PC units means HP Personal Systems Group executive Todd Bradley will now oversee two struggling businesses. HP considered spinning off its PC unit last year. The board later decided that it would hang onto the business-critical but low-margin unit.

The overall PC industry is stuck in neutral, but HP, the world’s largest computer maker, is traveling at high speed in reverse. PC sales fell 3% last year and 15% during the holiday quarter, with consumer computer sales tumbling 25%.

Whitman said on recent conference calls with investors that she hopes to streamline HP’s businesses and ensure that individual business groups work together in the future. She also said that the company’s divisions have been too separate in the past, leading to too much competition within the ranks. 

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The Reserve Bank of India

New Zealand may for the first time since 1982 pick a central bank veteran to lead the institution, as the nation contends with slower global growth and the fastest exchange-rate gains among most-traded currencies the past year.

Reserve Bank of New Zealand Deputy Governor Grant Spencer, 59, has the best chance of getting promoted, nine of 10 economists surveyed by Bloomberg News said, with the analysts covering the RBNZ at three of the country

Two St. Louis-area organizations, and a third group with a large office in Clayton, received a combined $230 million in federal New Markets Tax Credits, the U.S. Department of Treasury said Thursday.

The credits are designed to draw investment in businesses and real estate projects in low-income neighborhoods. Recipients - typically banks and community development groups - offer the credits as an incentive to investors in projects in qualifying Census tracts. They are worth 39 cents on the dollar, so the $230 million equates to $89.7 million.

In past years in St. Louis, these credits have been used to help fund everything from downtown office projects to equity investments in local businesses.

Recipients with local ties include:

U.S. Bancorp Community Development Corp., which is based in St. Louis but works on tax-credit financing nationwide, received a $100 million award. St. Louis Development Corp., the city-run development agency, received $50 million. Advantage Capital Community Development Fund, which is based in New Orleans but has a large office in Clayton, received $80 million.

The funds to not have to be used in a recipient’s home region - though they likely will be in the case of SLDC - and projects here have drawn New Markets credits from national lenders in the past.

This year, the awards include a set-aside to finance “healthy food” projects in so-called “food deserts” - areas with little access to quality groceries. One-fourth of SLDC’s award must go towards healthy food financing, and one-fifth of U.S. Bancorp’s.

All told, the Treasury Department awarded $3.6 billion in New Markets credits on Thursday. It received $26.7 billion worth of applications. President Obama is seeking $5 billion for New Markets Tax Credits in his 2013 budget.

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European Central Bank Governing Council member Ewald Nowotny said Standard & Poor

Banks will be allowed go below minimum liquidity levels set by global regulators during financial crises to avoid cash-flow difficulties.