TIMESCAST: PC Industry Shifts as Dell Goes Private

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February 6, 2013By Fritzie Andrade, Zena Barakat, Emily B. Hager, Erica Berenstein, Krishnan Vasudevan, Kriston Lewis, Abe Sater and Robin Lindsay

TimesCast Media+Tech: The effects of Dell’s landmark deal. | Kit Eaton reviews video editing apps | The entrepreneur and inventor James Dyson.

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The Lede: Video of Protests Across Tunisia After an Opposition Leader Is Gunned Down

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Video of a protest outside the interior ministry in Tunis on Wednesday from the blog Nawaat.

As my colleagues Kareem Fahim and Gerry Mullany report, there were protests across Tunisia on Wednesday following the assassination of Chokri Belaid, a leader of the secular opposition.

Video shot by activist bloggers for the independent Tunisian site Nawaat showed protesters rallying outside the interior ministry on the tree-lined Avenue Habib Bourguiba in Tunis early in the day, and then being chased from the street by police officers who fired tear gas into the crowd and beat demonstrators.

The Tunisian blog Nawaat’s video of police officers attacking protesters in Tunis on Wednesday.

After the avenue was cleared, witnesses reported that a small crowd accompanied the ambulance carrying Mr. Belaid’s body down the same street.

As news of the assassination spread, there were protests in other cities and reports of attacks on the offices of Ennahda, the ruling Islamist party. Mr. Belaid had criticized Ennahda’s leaders for failing to condemn violent attacks on his party’s activists by young Islamists, in a television appearance shortly before his death, the French radio station Europe 1 reported.

Agence France-Presse video showed protesters marching in Sidi Bouzid, the town where the Tunisian revolt began.

More video of the demonstration in Tunis, and a clip of protesters occupying the headquarters of Ennahda in the city of Sfax, was posted online by Jadal, a Tunisian news site set up by the Institute for Peace and War Reporting.

Video from the Tunisian news site Jadal, said to show protesters occupying the offices of the ruling party in Sfax on Wednesday.

A demonstration outside the office of Ennahda in the coastal city of Mahdia was caught on video by a Nawaat blogger.

Before the demonstration at the interior ministry was attacked by the police, activists in the crowd posted updates on the protest on Twitter.

Among the chants, witnesses reported, were calls for the resignation of the interior minister, Ali Larayedh, a leader of Ennahda who is a former dissident.

Mr. Larayedh called the assassination of Mr. Belaid a “terrorist act” and “a blow to the democratic transition experience in Tunisia,” the state news agency reported.

One member of the crowd was Amira Yahyaoui, the president of the rights organization Al Bawsala, who suggested that Tunisians had waited long enough for reform of the hated police force. After Mr. Balaid’s death, she wrote, it was “necessary to go inside the interior ministry and clear out the incompetents and, worse, the facilitators” who had allowed such acts of political violence to take place.

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Bucks Blog: Many Relying on Home Equity for Retirement

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Even though the housing market has not recovered, nearly half of older working Americans expect to use equity in their homes to help finance their retirement, a new survey finds.

Roughly 47 percent of employed Americans ages 50 to 70 said they were relying on equity in their homes, the Retirement Check-In survey from Ameriprise Financial found. The finding is surprising, an accompanying report notes, because housing values in many parts of the country remain below the level they were before the recession. Also, 37 percent of homeowners say they’re not on track to pay off their mortgage before they retire.

More people said they were relying on home equity now compared with before the recession, the report finds. When participants were asked whether, before the downturn, they had expected to rely on home equity to help pay for their retirement, just 39 percent said yes.

While the reason for that shift isn’t entirely clear, the report says its plausible that the loss in value of other investments during the recession may have been so steep that many older workers feel they have no other alternative, even if their homes are worth less than they used to be.

“My hypothesis is that people didn’t think they were going to need to tap into equity because they thought they would have sufficient assets,” said Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial. “Now, despite the fact they have reduced home equity, the shortfall between what they’ve saved and what they need is greater.”

The finding is typical of a “perplexing disparity” between Americans’ emotional outlook for retirement and the reality they face, the report said.

For instance, nearly three-quarters indicated that their dream retirement included taking “really nice vacations.” Yet, when asked if they would be able to afford the essentials in retirement, fewer than half said they felt “extremely” or “very” confident. And just 38 percent said they were confident they could afford the extras they had been anticipating in retirement, like traveling and hobbies.

The telephone survey included 1,000 employed Americans age 50 to 70, with investable assets of at least $100,000 (including employer-based retirement plans, but not real estate) and who are planning to retire at some point. Koski Research conducted the survey on behalf of Ameriprise Financial from Oct. 31 and Nov. 14, 2012. The margin of sampling error is plus or minus 3 percentage points.

What role does home equity play in your retirement plans?

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Well: Warning Too Late for Some Babies

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Six weeks after Jack Mahoney was born prematurely on Feb. 3, 2011, the neonatal staff at WakeMed Hospital in Raleigh, N.C., noticed that his heart rate slowed slightly when he ate. They figured he was having difficulty feeding, and they added a thickener to help.

When Jack was discharged, his parents were given the thickener, SimplyThick, to mix into his formula. Two weeks later, Jack was back in the hospital, with a swollen belly and in inconsolable pain. By then, most of his small intestine had stopped working. He died soon after, at 66 days old.

A month later, the Food and Drug Administration issued a caution that SimplyThick should not be fed to premature infants because it may cause necrotizing enterocolitis, or NEC, a life-threatening condition that damages intestinal tissue.

Catherine Saint Louis speaks about using SimplyThick in premature infants.


Experts do not know how the product may be linked to the condition, but Jack is not the only child to die after receiving SimplyThick. An F.D.A. investigation of 84 cases, published in The Journal of Pediatrics in 2012, found a “distinct illness pattern” in 22 instances that suggested a possible link between SimplyThick and NEC. Seven deaths were cited; 14 infants required surgery.

Last September, after more adverse events were reported, the F.D.A. warned that the thickener should not be given to any infants. But the fact that SimplyThick was widely used at all in neonatal intensive care units has spawned a spate of lawsuits and raised questions about regulatory oversight of food additives for infants.

SimplyThick is made from xanthan gum, a widely-used food additive on the F.D.A.’s list of substances “generally recognized as safe.” SimplyThick is classified as a food and the F.D.A. did not assess it for safety.

John Holahan, president of SimplyThick, which is based in St. Louis, acknowledged that the company marketed the product to speech language pathologists who in turn recommended it to infants. The patent touted its effectiveness in breast milk.

However, Mr. Holahan said, “There was no need to conduct studies, as the use of thickeners overall was already well established. In addition, the safety of xanthan gum was already well established.”

Since 2001, SimplyThick has been widely used by adults with swallowing difficulties. A liquid thickened to about the consistency of honey allows the drinker more time to close his airway and prevent aspiration.

Doctors in newborn intensive care units often ask non-physician colleagues like speech pathologists to determine whether an infant has a swallowing problem. And those auxiliary feeding specialists often recommended SimplyThick for neonates with swallowing troubles or acid reflux.

The thickener became popular because it was easy to mix, could be used with breast milk, and maintained its consistency, unlike alternatives like rice cereal.

“It was word of mouth, then neonatologists got used to using it. It became adopted,” said Dr. Steven Abrams, a neonatologist at Texas Children’s Hospital in Houston. “At any given time, several babies in our nursery — and in any neonatal unit — would be on it.”

But in early 2011, Dr. Benson Silverman, the director of the F.D.A.’s infant formula section, was alerted to an online forum where doctors had reported 15 cases of NEC among infants given SimplyThick. The agency issued its first warning about its use in babies that May. “We can only do something with the information we are provided with,” he said. “If information is not provided, how would we know?”

Most infants who took SimplyThick did not fall ill, and NEC is not uncommon in premature infants. But most who develop NEC do so while still in the hospital. Some premature infants given SimplyThick developed NEC later than usual, a few after they went home, a pattern the F.D.A. found unusually worrisome.

Even now it is not known how the thickener might have contributed to the infant deaths. One possibility is that xanthan gum itself is not suitable for the fragile digestive systems of newborns. The intestines of premature babies are “much more likely to have bacterial overgrowth” than adults’, said Dr. Jeffrey Pietz, the chief of newborn medicine at Children’s Hospital Central California in Madera.

“You try not to put anything in a baby’s intestine that’s not natural.” If you do, he added, “you’ve got to have a good reason.”

A second possibility is that batches of the thickener were contaminated with harmful bacteria. In late May 2011, the F.D.A. inspected the plants that make SimplyThick and found violations at one in Stone Mountain, Ga., including a failure to “thermally process” the product to destroy bacteria of a “public health significance.”

The company, Thermo Pac, voluntarily withdrew certain batches. But it appears some children may have ingested potentially contaminated batches.

The parents of Jaden Santos, a preemie who died of NEC while on SimplyThick, still have unused packets of recalled lots, according to their lawyer, Joe Taraska.

The authors of the F.D.A. report theorized that the infants’ intestinal membranes could have been damaged by bacteria breaking down the xanthan gum into too many toxic byproducts.

Dr. Qing Yang, a neonatologist at Wake Forest University, is a co-author of a case series in the Journal of Perinatology about three premature infants who took SimplyThick, developed NEC and were treated. The paper speculates that NEC was “most likely caused by the stimulation of the immature gut by xanthan gum.”

Dr. Yang said she only belatedly realized “there’s a lack of data” on xanthan gum’s use in preemies. “The lesson I learned is not to be totally dependent on the speech pathologist.”

Julie Mueller’s daughter Addison was born full-term and given SimplyThick after a swallow test showed she was at risk of choking. It was recommended by a speech pathologist at the hospital.

Less than a month later, Addison was dead with multiple holes in her small intestine. “It was a nightmare,” said Ms. Mueller, who has filed a lawsuit against SimplyThick. “I was astounded how a hospital and manufacturer was gearing this toward newborns when they never had to prove it would be safe for them. Basically we just did a research trial for the manufacturer.”

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Well: Warning Too Late for Some Babies

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Six weeks after Jack Mahoney was born prematurely on Feb. 3, 2011, the neonatal staff at WakeMed Hospital in Raleigh, N.C., noticed that his heart rate slowed slightly when he ate. They figured he was having difficulty feeding, and they added a thickener to help.

When Jack was discharged, his parents were given the thickener, SimplyThick, to mix into his formula. Two weeks later, Jack was back in the hospital, with a swollen belly and in inconsolable pain. By then, most of his small intestine had stopped working. He died soon after, at 66 days old.

A month later, the Food and Drug Administration issued a caution that SimplyThick should not be fed to premature infants because it may cause necrotizing enterocolitis, or NEC, a life-threatening condition that damages intestinal tissue.

Catherine Saint Louis speaks about using SimplyThick in premature infants.


Experts do not know how the product may be linked to the condition, but Jack is not the only child to die after receiving SimplyThick. An F.D.A. investigation of 84 cases, published in The Journal of Pediatrics in 2012, found a “distinct illness pattern” in 22 instances that suggested a possible link between SimplyThick and NEC. Seven deaths were cited; 14 infants required surgery.

Last September, after more adverse events were reported, the F.D.A. warned that the thickener should not be given to any infants. But the fact that SimplyThick was widely used at all in neonatal intensive care units has spawned a spate of lawsuits and raised questions about regulatory oversight of food additives for infants.

SimplyThick is made from xanthan gum, a widely-used food additive on the F.D.A.’s list of substances “generally recognized as safe.” SimplyThick is classified as a food and the F.D.A. did not assess it for safety.

John Holahan, president of SimplyThick, which is based in St. Louis, acknowledged that the company marketed the product to speech language pathologists who in turn recommended it to infants. The patent touted its effectiveness in breast milk.

However, Mr. Holahan said, “There was no need to conduct studies, as the use of thickeners overall was already well established. In addition, the safety of xanthan gum was already well established.”

Since 2001, SimplyThick has been widely used by adults with swallowing difficulties. A liquid thickened to about the consistency of honey allows the drinker more time to close his airway and prevent aspiration.

Doctors in newborn intensive care units often ask non-physician colleagues like speech pathologists to determine whether an infant has a swallowing problem. And those auxiliary feeding specialists often recommended SimplyThick for neonates with swallowing troubles or acid reflux.

The thickener became popular because it was easy to mix, could be used with breast milk, and maintained its consistency, unlike alternatives like rice cereal.

“It was word of mouth, then neonatologists got used to using it. It became adopted,” said Dr. Steven Abrams, a neonatologist at Texas Children’s Hospital in Houston. “At any given time, several babies in our nursery — and in any neonatal unit — would be on it.”

But in early 2011, Dr. Benson Silverman, the director of the F.D.A.’s infant formula section, was alerted to an online forum where doctors had reported 15 cases of NEC among infants given SimplyThick. The agency issued its first warning about its use in babies that May. “We can only do something with the information we are provided with,” he said. “If information is not provided, how would we know?”

Most infants who took SimplyThick did not fall ill, and NEC is not uncommon in premature infants. But most who develop NEC do so while still in the hospital. Some premature infants given SimplyThick developed NEC later than usual, a few after they went home, a pattern the F.D.A. found unusually worrisome.

Even now it is not known how the thickener might have contributed to the infant deaths. One possibility is that xanthan gum itself is not suitable for the fragile digestive systems of newborns. The intestines of premature babies are “much more likely to have bacterial overgrowth” than adults’, said Dr. Jeffrey Pietz, the chief of newborn medicine at Children’s Hospital Central California in Madera.

“You try not to put anything in a baby’s intestine that’s not natural.” If you do, he added, “you’ve got to have a good reason.”

A second possibility is that batches of the thickener were contaminated with harmful bacteria. In late May 2011, the F.D.A. inspected the plants that make SimplyThick and found violations at one in Stone Mountain, Ga., including a failure to “thermally process” the product to destroy bacteria of a “public health significance.”

The company, Thermo Pac, voluntarily withdrew certain batches. But it appears some children may have ingested potentially contaminated batches.

The parents of Jaden Santos, a preemie who died of NEC while on SimplyThick, still have unused packets of recalled lots, according to their lawyer, Joe Taraska.

The authors of the F.D.A. report theorized that the infants’ intestinal membranes could have been damaged by bacteria breaking down the xanthan gum into too many toxic byproducts.

Dr. Qing Yang, a neonatologist at Wake Forest University, is a co-author of a case series in the Journal of Perinatology about three premature infants who took SimplyThick, developed NEC and were treated. The paper speculates that NEC was “most likely caused by the stimulation of the immature gut by xanthan gum.”

Dr. Yang said she only belatedly realized “there’s a lack of data” on xanthan gum’s use in preemies. “The lesson I learned is not to be totally dependent on the speech pathologist.”

Julie Mueller’s daughter Addison was born full-term and given SimplyThick after a swallow test showed she was at risk of choking. It was recommended by a speech pathologist at the hospital.

Less than a month later, Addison was dead with multiple holes in her small intestine. “It was a nightmare,” said Ms. Mueller, who has filed a lawsuit against SimplyThick. “I was astounded how a hospital and manufacturer was gearing this toward newborns when they never had to prove it would be safe for them. Basically we just did a research trial for the manufacturer.”

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DealBook: Dell Goes Private in $24 Billion Buyout, Largest Since 2007

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9:32 a.m. | Updated

Dell announced on Tuesday that it had agreed to go private in a $24.4 billion deal led by its founder and the investment firm Silver Lake, in the biggest leveraged buyout since the financial crisis.

Under the terms of the deal, the buyers’ consortium, which also includes Microsoft, will pay $13.65 a share in cash. That is roughly 25 percent above where Dell’s stock traded before word emerged of the negotiations of its sale.

Michael S. Dell will contribute his stake of roughly 14 percent toward the transaction, and will contribute additional cash through his private investment firm, MSD Capital. Silver Lake is expected to contribute about $1 billion in cash, while Microsoft will loan an additional $2 billion.

Dell’s board is said to have met on Monday night to vote on the deal. In its statement, the company said Mr. Dell recused himself from any discussions about a transaction and did not vote.

As a newly private company – now more firmly under the control of Mr. Dell – the computer maker will seek to revive itself after years of decline. The takeover represents Mr. Dell’s most drastic effort yet to turn around the company he founded in a college dormitory room in 1984 and expanded into one of the world’s biggest sellers of personal computers.

But the advent of new competition, first from other PC manufacturers and then smartphones and the iPad, severely eroded Dell’s business. Such is the concern about the company’s future that Microsoft agreed to lend some of its considerable financial muscle to shore up one of its most important business partners.

“I believe this transaction will open an exciting new chapter for Dell, our customers and team members,” Mr. Dell said in a statement. “Dell has made solid progress executing this strategy over the past four years, but we recognize that it will still take more time, investment and patience, and I believe our efforts will be better supported by partnering with Silver Lake in our shared vision.”

Still, analysts have expressed concern that even a move away from the unyielding scrutiny of the public markets will not let Mr. Dell accomplish what years of previous turnaround efforts have failed to achieve.

Nevertheless, the transaction represents a watershed moment for the private equity industry, reaching heights unseen over the past five years. It is the biggest leveraged buyout since the Blackstone Group‘s $26 billion takeover of Hilton Hotels in the summer of 2007, and it is supported by more than $15 billion of debt financing raised by no fewer than four banks.

“Michael Dell is a true visionary and one of the pre-eminent leaders of the global technology industry,” Egon Durban, a managing partner at Silver Lake, said in a statement. “Silver Lake is looking forward to partnering with him, the talented management team at Dell and the investor group to innovate, invest in long-term growth initiatives and accelerate the company’s transformation strategy to become an integrated and diversified global I.T. solutions provider.”

Mr. Dell first approached the board about taking the company private in August. That prompted the board to form a special committee, with JPMorgan Chase and the law firm Debevoise & Plimpton as advisers. It was charged with considering alternatives to a management buyout, including other deals or borrowing money to pay out a special dividend.

To help ward off accusations of self-dealing by Mr. Dell, the special committee has hired an independent investment bank, Evercore Partners, specifically to oversee a 45-day “go shop” period in which the company will solicit other potential buyers.

“The special committee and its advisers conducted a disciplined and independent process intended to ensure the best outcome for shareholders,” Alex J. Mandl, the head of the Dell independent committee, said in a statement. “Importantly, the go-shop process provides a real opportunity to determine if there are alternatives superior to the present offer from Mr. Dell and Silver Lake.”

Dell itself was advised by Goldman Sachs and the law firm Hogan Lovells, while Mr. Dell retained Wachtell, Lipton, Rosen & Katz as legal counsel. Silver Lake was advised by Bank of America Merrill Lynch, Barclays, Credit Suisse, RBC Capital Markets and the law firm Simpson Thacher & Bartlett.

On Tuesday, Mr. Dell sent a memo to company employees about the deal. Here is a copy of the memo:

Today, we announced a definitive agreement for me and global technology investment firm Silver Lake to acquire Dell and take it private.

This transaction is an exciting new chapter for Dell, our team and our customers. We can immediately deliver value to stockholders, while continuing to execute our long-term growth strategy and focus on helping customers achieve their goals.

Together, we have built an incredible business that generates nearly $60 billion in annual revenue. We deliver enormous customer value through end-to-end solutions that are scalable, secure and easy to manage, and Enterprise Solutions and Services now account for 50 percent of our gross margins.

Dell’s transformation is well underway, but we recognize it will still take more time, investment and patience. I believe that we are better served with partners who will provide long-term support to help Dell innovate and accelerate the company’s transformation strategy. We’ll have the flexibility to continue organic and inorganic investment, and grow our business for the long term.

I am particularly pleased to be in partnership with Silver Lake, a world-class investment firm with an outstanding reputation and significant experience in the technology sector. They know all the technology business models, understand the value chain and have an extremely strong global network of contacts. I am also glad that Microsoft is part of the transaction, further building on a nearly 30-year relationship.

I am honored to continue serving as chairman and CEO, and I look forward to working with all of you, including our current senior leadership team, to accelerate our efforts. There is much more we can accomplish together. I am committed to this journey and I am grateful for your dedication and support. Please, stay focused on delivering results for our customers and our company.

There is still considerable work to be done, and undoubtedly both challenges and triumphs lie ahead, but as always, we are making the right decisions to position Dell, our team and our customers for long-term success.

Michael

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High-Level Feud Bares Tensions in Iran

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TEHRAN — President Mahmoud Ahmadinejad escalated a bitter political fight this week with Iran’s most influential political family by disclosing secret film recordings of what he purported were fraudulent business deals.




During a Sunday session of Parliament, broadcast on state radio, Mr. Ahmadinejad singled out the head of the Parliament, Ali Larijani, a political rival with strong links to influential Shiite Muslim clerics and one of several brothers who have held top positions in the Iranian government.


His younger brother Sadegh, 52, heads Iran’s judiciary, while his oldest brother, Mohammad Javad, a Berkeley-educated mathematician, is also a judiciary official.


On Monday, a conservative newspaper, Kayhan, hinted that the nation’s supreme leader, Ayatollah Ali Khamenei, had been forced to step in to prevent both men from giving potentially damaging news conferences, which were both canceled at the last minute.


This was not the first time Ayatollah Khamenei has been forced to intervene in this feud. In October, he issued an edict aimed at stopping the infighting, saying that those creating divisions before the June 14 presidential elections “betray” the country.


Mr. Ahmadinejad, who went to the Parliament in a failed attempt to head off the impeachment of his labor minister, Abdolreza Sheikholeslami, said Mr. Larijani and his fellow lawmakers had obstructed the government, stepped beyond their constitutional boundaries and written letters ordering the annulment of government decisions.


Instructed by Mr. Larijani to stick to the subject of the impeachment, Mr. Ahmadinejad said, “Don’t order me to close my mouth because you say it’s the law.”


With that, Mr. Ahmadinejad, who for years has threatened to reveal the names of corrupt officials, played a video clip of a conversation in which another of Mr. Larijani’s brothers, Fazel, appeared to discuss the purchase of a state company under favorable terms, the semiofficial Tabnak Web site reported. While Fazel Larijani used to head a medical association in Iran, his current position is unclear.


The public accusation, rare in Iran, could signal a new phase in an already intense conflict between Mr. Ahmadinejad, who represents a powerful group of young, ambitious politicians, and Mr. Larijani, who is the official representative of the holy city of Qum, the center of Shiite scholarship in Iran.


Mr. Ahmadinejad said his associate, Saeed Mortazavi, 45, was also at the taped meeting. In January, Mr. Mortazavi was dismissed as the head of Iran’s enormous social welfare organization under pressure from Parliament. Some days later, however, he was rehired by the president in the same position, this time as official caretaker.


During the conversation, read out in part by Mr. Ahmadinejad to astonished lawmakers, Fazel Larijani appears to try to use his family connections to buy a factory from the social welfare organization. He promises leniency for Mr. Mortazavi, the former Tehran prosecutor who faces several criminal proceedings over accusations that he played a role in the deaths of three protesters in a substandard prison in 2009.


Mr. Mortazavi was arrested Monday evening, the Fars news agency reported, though no reason was given.


“These are audio and video, and the tape is clear,” Mr. Ahmadinejad is quoted as saying by the Iranian Students’ News Agency. “If the honorable Parliament speaker sees fit, we can turn over the 24 to 25 hours to you,” he said of the recordings. On Monday, Iran’s Islamic Republic News Agency, a mouthpiece for Mr. Ahmadinejad, deepened the split by publishing the audiotape on its Web site.


Ali Larijani, cheered on by the Parliament, which has lost nearly every serious political battle with the president, silenced the room, saying: “Let him tell his words. If there is anything about my family, then let him talk about it.”Mr. Larijani said it was a “mafia film” and recalled how he had a meeting with Mr. Ahmadinejad’s estranged brother, Davoud. “He said many things against you,” Mr. Larijani told the president, “about economic corruption, about your inner circle and your relations with foreign countries.”


For his part, Fazel Larijani strongly denied any wrongdoing, saying that while he did appear in the clip, the words were not his, but rather had been added in a voiceover. Calling Mr. Ahmadinejad and Mr. Mortazavi “mafialike individuals,” he said he would sue them both for “spreading lies and disturbing public opinion.”


On Monday, several officials criticized Mr. Ahmadinejad and Ali Larijani, accusing them of lacking self-control and bringing shame on the country. “They broke the leader’s heart and gave the friends of the Islamic republic almost a seizure,” said Mojtaba Zolnour, a special consultant to the supreme leader, Ayatollah Khamenei, the semiofficial Iranian Labor News Agency reported. “They provided ammunition for the foreign media on the eve of our election.”


This article has been revised to reflect the following correction:

Correction: February 5, 2013

An earlier version of this article misstated the birth order of Ali Larijani and his brother Sadegh Larijani. Sadegh is younger than Ali, not older.



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DealBook: U.S. and States Prepare to Sue S.&P. Over Mortgage Ratings

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The Justice Department, along with state prosecutors, plans to file civil charges against Standard & Poor’s Ratings Service, accusing the firm of fraudulently rating mortgage bonds that led to the financial crisis, people briefed on the plan said Monday.

Up until last last week, the Justice Department had been in settlement talks with S.&P., these people said. But the negotiations broke down after the Justice Department said it would seek a settlement in excess of “10 figures,” or at least $1 billion, these people said, which would wipe out the profits of S.&P.’s parent, the McGraw-Hill Company, for an entire year.

McGraw-Hill earned $911 million last year.

A suit against S.&P. would be the first the government has brought against the credit ratings agencies related to the financial crisis, despite continued questions about the agencies’ conflicts of interest and role in creating a housing bubble.

By bringing a civil suit, as opposed to a criminal case, the Justice Department’s burden of proof will be less, perhaps lowering the bar for a successful prosecution.

In a statement on Monday, S.&P. said it had received notice from the Justice Department over a pending lawsuit.

The ratings agency argued any such legal action would be baseless, since it downgraded plenty of mortgage-backed investments, including in the two years leading up to the financial crisis. It also contended that other observers of the debt markets, including government officials, believed at the time that any problems within the housing sector could be contained.

“A D.O.J. lawsuit would be entirely without factual or legal merit,” the agency said in its statement. “With 20/20 hindsight, these strong actions proved insufficient – but they demonstrate that the D.O.J. would be wrong in contending that S.&P. ratings were motivated by commercial considerations and not issued in good faith.”

Shares in McGraw-Hill were down 3.8 percent in midafternoon trading on Monday, at $56.07.

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Well: A Doctor's Struggle With Numbers

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My youngest child has been struggling with numbers.

This all started around the time of his 4th birthday, in mid-November. He knew he was getting older and asked a lot of questions about babies, who were “too little to have a number,” being less than 1 year old. Then, on the day of his birthday, he wanted to know when he was turning 4.

I told him that today was his birthday, that he turned 4 today.

“But when do I turn 4?” He had recently learned to emphasize certain words in an effort to assist his dim parents in getting his questions answered.

I told him at 8 in the morning, the time he was born.

“No, no, when do I turn 4?”

I looked at him helplessly, wondering whether he was expecting some pivotal moment when he would suddenly gain five inches in height. He decided that the anointed time occurred later that day, after he received his presents.

A week later, his mother and I went for a car ride with her parents, both in their mid-70s. In a rare quiet moment amid the usual barrage of instructions on how to navigate the rural western Pennsylvania roads, our son spoke up.

“When is Pappy going to die?”

The adults fell over themselves responding, trying to both reassure him and ourselves, as if the faster and louder we answered his question, the more we would negate it: A lot of years. Not for a long, long time. We hope he never does.

This satisfied him for the moment, but much like his father, he broods about these types of important topics. A couple of hours later, back at the house, he asked as if in mid-thought: “But, what is the last number?”

I repeated his question, stalling.

“Yes, what is the last number? What’s my last number?” he asked. His mother and I glanced at each other, in a quick game of chicken to see who would answer first.

“We don’t know, honey,” I finally said. He looked up at my wife, who nodded in agreement.

My son’s words came back to me the following Monday when I saw my first patient, a man in his 70s whose leukemia didn’t get worse on chemotherapy, but unfortunately also didn’t get better. We had run out of options, aside from supportive care.

“How long does he have?”

My patient’s son asked the question that was on everyone’s mind, and when he did, the wave of emotion that washed across the room was almost palpable. My patient’s daughter crossed her legs, and his wife started to cry. So did my patient, though he tried to hide it, glancing up at the fluorescent ceiling lights of the clinic room. Guys in his generation, I’ve found, don’t like to appear weak in front of their family.

I turned to my patient and asked him if he wanted me to talk about this, about his prognosis. My first responsibility in this type of situation is always to my patient and what he wants to hear. Some people want to know specifics, down to the half-month of predicted survival; others want no information at all, as if hearing a number will seal their fate.

“Sure, I guess so,” he answered. He did want to know, but he didn’t want to know.

Oncologists are notoriously bad at predicting survival, and none of us wants to be known as “the doctor who told me I would be dead by now,” the doctor who made a prediction of imminent demise, sending a family into a terrifying tailspin of goodbyes, only to be proven wrong and subsequently mocked for years to come. One of my patients, upon being told by another doctor that she had two months to live, held Christmas in April so she could spend one last holiday with her grandchildren. She survived to see two more Christmases.

At the same time, we need to be truthful and give guidance to people who want time to prepare, time to write wills and pay off debts, to say goodbyes and to leave instructions, to tie up the loose ends of a life now heavy with meaning.

We try to provide hope, but not false hope.

So we give ranges, starting with the best estimate of survival, because my patients have told me they shut down after they hear the worst estimate. We talk about setting goals, about maximizing quality of life, because we don’t have much leverage with quantity of life. We emphasize spending as much time as possible with family and friends, and as little time as possible with people wearing white coats. We tell them we’re not going to give up if they don’t give up.

But the truth is, we don’t know.


Dr. Mikkael Sekeres is director of the leukemia program at the Cleveland Clinic.

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Well: A Doctor's Struggle With Numbers

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My youngest child has been struggling with numbers.

This all started around the time of his 4th birthday, in mid-November. He knew he was getting older and asked a lot of questions about babies, who were “too little to have a number,” being less than 1 year old. Then, on the day of his birthday, he wanted to know when he was turning 4.

I told him that today was his birthday, that he turned 4 today.

“But when do I turn 4?” He had recently learned to emphasize certain words in an effort to assist his dim parents in getting his questions answered.

I told him at 8 in the morning, the time he was born.

“No, no, when do I turn 4?”

I looked at him helplessly, wondering whether he was expecting some pivotal moment when he would suddenly gain five inches in height. He decided that the anointed time occurred later that day, after he received his presents.

A week later, his mother and I went for a car ride with her parents, both in their mid-70s. In a rare quiet moment amid the usual barrage of instructions on how to navigate the rural western Pennsylvania roads, our son spoke up.

“When is Pappy going to die?”

The adults fell over themselves responding, trying to both reassure him and ourselves, as if the faster and louder we answered his question, the more we would negate it: A lot of years. Not for a long, long time. We hope he never does.

This satisfied him for the moment, but much like his father, he broods about these types of important topics. A couple of hours later, back at the house, he asked as if in mid-thought: “But, what is the last number?”

I repeated his question, stalling.

“Yes, what is the last number? What’s my last number?” he asked. His mother and I glanced at each other, in a quick game of chicken to see who would answer first.

“We don’t know, honey,” I finally said. He looked up at my wife, who nodded in agreement.

My son’s words came back to me the following Monday when I saw my first patient, a man in his 70s whose leukemia didn’t get worse on chemotherapy, but unfortunately also didn’t get better. We had run out of options, aside from supportive care.

“How long does he have?”

My patient’s son asked the question that was on everyone’s mind, and when he did, the wave of emotion that washed across the room was almost palpable. My patient’s daughter crossed her legs, and his wife started to cry. So did my patient, though he tried to hide it, glancing up at the fluorescent ceiling lights of the clinic room. Guys in his generation, I’ve found, don’t like to appear weak in front of their family.

I turned to my patient and asked him if he wanted me to talk about this, about his prognosis. My first responsibility in this type of situation is always to my patient and what he wants to hear. Some people want to know specifics, down to the half-month of predicted survival; others want no information at all, as if hearing a number will seal their fate.

“Sure, I guess so,” he answered. He did want to know, but he didn’t want to know.

Oncologists are notoriously bad at predicting survival, and none of us wants to be known as “the doctor who told me I would be dead by now,” the doctor who made a prediction of imminent demise, sending a family into a terrifying tailspin of goodbyes, only to be proven wrong and subsequently mocked for years to come. One of my patients, upon being told by another doctor that she had two months to live, held Christmas in April so she could spend one last holiday with her grandchildren. She survived to see two more Christmases.

At the same time, we need to be truthful and give guidance to people who want time to prepare, time to write wills and pay off debts, to say goodbyes and to leave instructions, to tie up the loose ends of a life now heavy with meaning.

We try to provide hope, but not false hope.

So we give ranges, starting with the best estimate of survival, because my patients have told me they shut down after they hear the worst estimate. We talk about setting goals, about maximizing quality of life, because we don’t have much leverage with quantity of life. We emphasize spending as much time as possible with family and friends, and as little time as possible with people wearing white coats. We tell them we’re not going to give up if they don’t give up.

But the truth is, we don’t know.


Dr. Mikkael Sekeres is director of the leukemia program at the Cleveland Clinic.

Read More..

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