Monday, 3 March 2014

Citigroup, Banamex USA disclose subpoenas


Citigroup and affiliate Banamex USA have disclosed grand jury subpoenas concerning compliance with the Bank Secrecy Act and anti-money laundering requirements under federal laws and banking regulations.


Citigroup Inc. said in a regulatory filing on Monday that the bank and Banamex USA received subpoenas from the U.S. Attorney's Office for the District of Massachusetts. Banamex USA also received a subpoena from the Federal Deposit Insurance Corp.


Citi says it is cooperating fully with the inquiries.


On Friday, Citi announced that it lowered its 2013 earnings by $235 million, saying it was a victim of fraud committed by Mexican oil services company Oceanografia S.A. de C.V., or OSA. Citi said that OSA overstated by $400 million the business it was doing with Mexico's state-owned oil company Petroleos Mexicanos, or Pemex. OSA used falsified invoices as collateral for $585 million in loans from Banamex, Citigroup said. But after an investigation, Citigroup could only verify $185 million of invoices.


Citi said that it believes the case is isolated, and it is moving to recover the money and identify anyone involved in the fraud. Mexican authorities said they have taken control of OSA, in part, to help make sure Citi recoups the funds.


Shares of Citigroup fell 95 cents to $47.68 in afternoon trading.



Comcast to buy ad tech firm FreeWheel for $320M


Comcast is buying online ad technology firm FreeWheel Media for about $320 million in a move that supports both its media content and cable businesses.


That's according to a person familiar with the matter, who spoke on condition of anonymity because the deal isn't final.


The purchase will help Comcast Corp. make money from ads placed on its content over a variety of platforms as FreeWheel technology evolves and gets better.


FreeWheel will also continue to help other media companies profit from their own digital content, which encourages them to make more shows available on demand and on other platforms that Comcast offers to its subscribers.


The person says San Mateo, Calif.-based FreeWheel will continue to operate independently. Its current investors include Disney's Steamboat Ventures and Time Warner's TBS.



La. farms await a new generation


About 70 percent of U.S. farmland will change hands within the next two decades, the U.S. Department of Agriculture predicts.


America's farmers are aging, and with about 52 percent of the country's land made up of small farms and ranches, it will be up to new generations of farmers to keep the industry growing.


In Acadiana, it has become harder and harder to find young people interested in farming, said Ricky Gonsoulin, Iberia Parish president for the Louisiana Farm Bureau.


"Who could blame them?" he added.


"I am very concerned about the amount of the young people that are getting into agriculture, specifically the row-crop business," Gonsoulin, 47, said. "Way back when you had several young people getting out of college or trade school and getting into this business to make a living. Now the price and production costs are rising, the commodity prices are falling. It's a challenge. Your back's against the wall."


Gonsoulin's family has been farming sugar cane for generations, which has put them at an advantage, he said. New farmers just breaking into the business must rely on hefty bank loans to get started.


Longtime rice farmer and Evangeline Parish Farm Bureau president Richard Fontenot, 44, said the cost to start a 1,000-acre row-crop farm, which is a relatively small business, could range from $500,000 to $1 million.


"A new tractor alone costs about $200,000. Pre-owned equipment can cost in the $150,000 range," Fontenot said.


And that, Gonsoulin said, doesn't include land.


"If you don't have a parent or an in-law that is currently farming where you can inherit the farm or agree to terms to buy the farm out, it's almost impossible to get a loan to go into business as a new farmer," Gonsoulin said.


C.R. "Rusty" Cloutier, president and CEO of MidSouth Bank, said his company offers loans for agriculture, but seldom gets new farmers.


That doesn't mean it can't be done.


In 2003, New Iberia brothers Hugh, 38, Mike and Chris Andre, both 29, set out to begin their sugar cane farming business.


Their family had no background in agriculture, Mike Andre said.


"Our dad worked in the oilfield and our mom is a schoolteacher," Mike Andre said. "The only farming background that we have is Hugh started farming with his best friend's daddy when he was real young. When he was 10 years old, he used to go around the farm on a tractor."


Their company, HMC Farm LLC, now farms on roughly 5,000 acres in Vermilion, St. Martin and Iberia parishes.


Like Gonsoulin, Mike Andre said new farmers face more challenges than they did even a decade ago.


For cane farmers, the introduction of Mexican sugar into the American market has driven prices down for U.S. sugar, Andre said. Another major obstacle is unpredictable weather, he said.


"Our biggest thing that we are relying on is Mother Nature. If we don't get the optimum weather then we don't grow a crop. The last three years have been excellent," he said. "But prices have been going down. You can grow the best crop in the world. But if you don't get paid for product it doesn't matter."


Rising fuel and equipment costs also affect production, he said.


The Agriculture Department estimates that nationwide, the number of family farms has grown 4 percent after decades of decline. But most of these farms are small operations.


According to the department's Ag Census, there has been a small increase in large family farms and non-family farms, but fewer mid-level farms. Organizations such as Agriculture of the Middle, which is led by a committee of four state university representatives and the Rural Advancement Foundation, are trying to revive the middle sector of agriculture and supply chains.


Last fall there were 339 students enrolled in Louisiana State University's College of Agriculture. The enrollment rate is significantly less than other colleges at the university. LSU's College of Engineering, for example, had 645 students enrolled in the fall 2013 semester.


Ralynn O'Brien, 19, a LSU freshman and daughter of an Iowa, La., rice farmer, said she thinks young farmers will continue to emerge. As the state president for Future Farmers of America, she said she has been able to travel around the country and meet with teens who are considering a career in agriculture.


"It's actually surprising because it's definitely not an easy job," she said. She said she recently spoke with a new FFA member who said he plans to take on the family business.


"His dad grows sugar cane and he said that something that really spoke to him is the FFA creed. One line of it says 'For I know the joys and discomforts of agriculture life.' He said that it really stood out to him," O'Brien said. "He's seen his family go through the good times and the bad times.


"Even though he's seen all that, it is something that he wants to do because he couldn't imagine his life growing up without it."


State FFA reporter Emily Hartzog, 19, is studying agriculture education at Louisiana Tech University. She said her father was a teacher and her grandfather grew watermelon in Angie, a village in Washington Parish.


There are only a handful of students at Tech who share her major, she said, but there is a statewide need for agriculture educators.


"Agriculture is the foundation of our nation. One thing that a lot of people don't understand is where their food comes from and where their clothes comes from," she said. "It all starts with the farmer. Where would be without American farmers?"


Now with a 10-year-old business that spans three parishes, Mike Andre and his twin brother, Chris, have a lot to celebrate. But it has not been an easy journey, he said.


"It was a tough start, especially the first five years," he said. "But we are still in the game.


"Make sure it's what you want to do because farming is not a simple life," he advised. "It has its perks. But it's not simple. You are worried about weather. You are worried about prices. You are worried about your labor. There's always worry going on, which is true for any job."


"But it's a little bit different when you've got to rely on Mother Nature."



Sanctions against Russia likely but they’re no easy task

McClatchy Newspapers



As Russia tightened its grip Monday on the Crimean peninsula, the Obama administration scrambled to find meaningful ways to sanction a nation that does relatively little U.S. business and exports primarily energy products that allies in Europe badly need.


The first step, a likely boycott of an international summit in Sochi, Russia, in June, is largely a public-relations slap. The administration has stronger tools at its disposal, including going after Russian banks or Russian exports of natural gas. Experts think the most likely scenario is the combination of an international aid package to shore up the fledgling Ukrainian interim government and targeted sanctions on key allies of Russian leader Vladimir Putin to make it harder for them to access European bank accounts.


“Over time, this will be a costly proposition for Russia,” President Barack Obama said during a photo-op Monday, hinting at coming sanctions. He called on Congress to make an aid package for the Ukrainian people a “first order of business.”


In a sign of the potential economic costs for Russia, the Russian ruble lost 2 percent of its value against the dollar Monday. The nation’s stock market fell by 12 percent, and the central bank burned through billions in foreign reserves to prevent a steeper slide of the currency and raised its key lending rate by a steep 1.5 percentage points to entice investors to keep purchasing Russian bonds.


Sharing little information, State Department spokeswoman Jen Psaki on Monday described efforts as “farther along” in preparing a sanctions package, suggesting it was inevitable unless Moscow reverses course and withdraws immediately from Ukraine.


“It’s likely that we will put those in place, and we’re preparing that right now,” Psaki said in a call with reporters, adding that European counterparts were being briefed a day before Secretary of State John Kerry was scheduled to arrive in the Ukrainian city of Kiev to show solidarity with the embattled government.


Trade between the United States and Russia is inconsequential: Russia isn’t among the top two dozen export markets for U.S. products or among the top 12 nations from which the United States imports.


But Russia was the world’s largest oil producer and second largest oil exporter last year. Its oil and natural gas exports go chiefly to its immediate neighbors and to the European Union. The most obvious, yet difficult, target to hit in Russia is the massive energy sector.


To be effective, any sanctions on Russian oil and natural gas must be matched by similar action from the European Union.


“If the EU stops buying (natural) gas from Russia, that’s $100 billion that can’t be exported elsewhere,” said Anders Aslund, a Russia expert for the Peterson Institute for International Economics, adding that “the big thing is to hit Russia’s finances.”


But there’s a rub. The EU needs Russian energy resources, and there aren’t any quick options for replacing supplies of natural gas. Sanctioning Russia could raise the prices of resources, giving Russia a windfall even as its volumes drop. Additionally, the EU is just crawling back from a deep recession, and significantly raising energy prices would surely stifle recovery efforts.


“I don’t think anyone would seriously talk about imposing (a ban on the) sale of oil and gas,” said Cory Welt, a research professor and Russia expert at George Washington University’s Elliott School.


There are other ways to hit at Russia’s powerful energy sector and put pressure on Putin. The Treasury Department, which had no comment Monday, could try to target the assets of individuals tied to Putin, perhaps even those at state-controlled banks and energy companies.


Russia has three large politically connected energy companies: Gazprom, Lukoil and OAO Rosneft. Rosneft inked a deal with ExxonMobil in August 2011 that gave it access to deepwater drilling in the Gulf of Mexico in exchange for ExxonMobil investing $2.2 billion toward Arctic drilling in the Kara Sea.


Hitting Rosneft risks a blowback on U.S. energy companies that operate in Russia.


“It’s not our practice to comment on speculation or private discussions,” said Alan Jeffers, an ExxonMobil spokesman.


One major oil company, ConocoPhillips, sold back its 20 percent stake in Lukoil in August 2012.


Experts think the administration is likely to target rich political allies of Putin, limiting their access to the global financial system. Many park their money in European banks, especially in Cyprus. That was evident last year, when a planned government seizure of bank deposits prompted an outcry from Putin on the behalf of Russians with billions in Cypriot banks.


Those targeted “sanctions would bite, particularly for officials with connections to Europe. They don’t want that kind of isolation,” said Welt. “Putin is not going to back down simply because Europeans impose sanctions but it would increase pressure . . . from below.”


Speaking in Washington on Monday, Sen. John McCain, R-Ariz., also called for hitting the Russian elite he called “these kleptocrats, these corruption people and the people that ordered this.”


He called for economic sanctions and for expanding the Magnitsky Act, which seeks to punish Russian officials by blocking them from entering the United States.


“We could expand it and identify those people and it’d be their last trip to Las Vegas,” McCain said.


Hannah Allam and Lesley Clark contributed to this article.



Tyco selling South Korean security arm for $1.93B


Tyco is selling its South Korean security business to the asset manager The Carlyle Group for about $1.93 billion.


Tyco Fire & Security Services Korea Co. Ltd. and its subsidiaries form and run Tyco International Ltd.'s South Korean security business. That business serves approximately 475,000 small-and-medium-sized businesses, commercial and residential customers.


Tyco, based in Switzerland, said Monday that it anticipates net proceeds of $1.85 billion. Tyco said the proceeds will allow it to increase the amount of cash it uses for acquisitions, stock buybacks and other corporate purposes.


Due to the sale, Tyco now expects second-quarter earnings from continuing operations of 39 cents to 41 cents per share, down from 44 cents to 46 cents per share. Analysts predict 46 cents per share.


The deal is expected to close in Tyco's fiscal third quarter.



Budget carrier flydubai boasts $61 million profit


Budget Mideast carrier flydubai says it recorded $60.7 million in profit last year out of total revenue of around $1 billion.


The airline said Monday that earnings were up 47 percent from 2012. Dubai International, where flydubai is based, handled 66.4 million passengers in 2013, making it one of the business airports in the world.


Flydubai says demand for travel within a five-hour flying radius of Dubai in the United Arab Emirates resulted in an increase of nearly 40 percent in passenger numbers to 6.82 million last year.


The airline is among the Gulf's fastest-growing airlines. It has committed to buying up to 111 Boeing 737 aircraft.


Flydubai operates an average of 1,100 flights a week and flies to 66 destinations.



Photo: UK discourages talk of Russia sanctions


A British government document caught by a photographer's lens suggests that officials there are against imposing economic sanctions on Russia, a position which could complicate any U.S. effort to isolate Moscow over its military advances on Ukraine.


The document, captured by a photographer outside the British prime minister's Downing Street office as it was carried in by an adviser, says Britain "should not support for now trade sanctions or close London's financial center to Russians," according to the BBC, which first reported the blooper Monday.


It's not clear whether the document presents a settled U.K. position or just the view of one set of officials within government.


Britain's views on sanctions are important in part because London is a key hub for Russian investment.


Downing Street had no immediate comment.