Friday, June 29, 2012

China Province Backtracks on Housing

SHANGHAI—China's central Henan province appears to have beaten a hasty retreat on a proposal to ease housing-market curbs in an about-face reminiscent of several earlier episodes across the country, illustrating continued tensions between Beijing and local governments over property policies.

The move pulls back an attempt to help first-time home buyers in the province with discounted loans.

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Reuters

A construction site for a residential complex in Wuhu

In a quick and chaotic reversal, Henan's provincial government Wednesday removed a newspaper report it had posted on its website two days earlier, outlining how it directed banks to extend loans at rates of as much as 30% below the benchmark lending rate for first-home buyers.

Such cat-and-mouse games between the local governments and the central government have been commonplace since China rolled out its property tightening campaign two years ago, which includes higher down-payment requirements and outright bans on purchases of second and third homes in some areas.

Local authorities didn't put the actual directives online, but posted the newspaper report in its entirety, an indication of caution pending the central government's response.

When asked for comment, an official from the Henan government's information office referred to a report by a different newspaper, the 21st Century Business Herald, which cited an unnamed source from the Henan office of China's banking regulator as saying that the easing measures weren't in line with the central government's policy.

The official recited the headline of the report—"Henan Housing Loan Policy Cancelled; Official Says Policy Was Mistakenly Passed On"—but declined to say more.

Henan faces huge pressure from slowing economic growth, and the relevant authorities might have hoped to accelerate growth through the real-estate sector, the newspaper cited the unnamed official as saying.

Henan's policy proposal was sent to different departments of the banking regulator over the past two weeks but was then revoked, according to the newspaper.

The Henan branches of Bank of China Ltd. and Industrial & Commercial Bank of China said they weren't offering home-loan discounts.

Calls to the Henan branch of the country's banking regulatory agency, which was cited by the 21st Century Business Herald, weren't answered. Officials at China's central Ministry of Housing and Urban Development couldn't be reached for comment.

As China's economic growth weakens, the central government has been slightly more tolerant of local authorities' policies aimed at propping up the real-estate market, particularly if the policies try to meet "real" demand from first-home buyers and appear designed to exclude speculators.

Local governments, dependent on land and property sales for much of their revenue, have devised a raft of policies to spur sales, offering tax concessions and more lenient residency rules for out-of-town buyers.

But while cities have been able to get away with introducing tax concessions, Beijing has rejected a number of local authorities' adjustments to the tightening measures that directly contravene the central government's policies, particularly in regard to the limits on home purchases.

In October, Foshan in Guangdong province had its wrist slapped when it proposed easing curbs on the number of homes a buyer could purchase, while in February, Wuhu in Anhui province also had to reverse a move to provide subsidies for home purchases. Earlier this month, local media reported Beijing had rejected a plan from Shijiazhuang in Hebei province to ease limits on the number of homes a family could buy.

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Thursday, June 28, 2012

Hey big spender

He didn’t want to crimp his lifestyle.

Hedge fund honcho Phil Falcone improperly borrowed client cash to continue living the high life with his glamorous socialite wife, including a private jet, an estate on St. Barts and two Manhattan town houses, according to a bombshell complaint.

The Securities and Exchange Commission slapped Falcone, the founder of Harbinger Capital Management, with civil fraud charges yesterday, accusing him of taking out an improper loan from one of his funds to pay his personal taxes, playing favorites with clients and manipulating the markets.

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Poor moneybags Phil Falcone. What’s a guy to do when his personal dough is tied up in such essentials as a St. Barts villa and a private jet?

“Today’s charges read like the final exam in a graduate school course in how to operate a hedge fund unlawfully,” Robert Khuzami, director of the SEC’s division of enforcement, said in a statement.

Falcone, who has been battling the SEC’s pending allegations for months, denied the charges yesterday through his lawyer, Matthew Dontzin.

“The notion that Mr. Falcone committed a fraud in connection with the loan from a Harbinger fund is unsupportable,” Dontzin said in a statement.

Dontzin said the loan was obtained with the approval of “a leading national law firm” and that all the charges will be “vigorously defended in the courthouse.”

The SEC claimed that Falcone’s need to keep up with the Joneses prompted the 49-year-old money manager to forgo a bank loan backed by his personal assets to pay off a looming tax bill in 2009, according to the charges.

Instead, Falcone borrowed the $113 million on the sly from Harbinger’s Special Situations Fund — a $2.4 billion fund that had recently barred nervous investors from taking their money out.

Falcone — who made billions betting against the subprime mortgage market — hid the transaction from investors for months, according to the suit. By June 2010, the fund was unable to meet the flurry of investor redemption requests.

Falcone “undertook significant personal expenditures” in early 2009 after Lehman Brothers collapsed, including “extensive” renovations on his Manhattan town houses and paying for a security detail, according to the complaint.

The SEC said Falcone was also sinking a lot of money into motion pictures — most likely with his wife Lisa’s production company, Everest Entertainment, which was behind the 2010 film “Mother and Child,” with Samuel L. Jackson.

The SEC is seeking to bar Falcone from serving as an officer or director of a public company, which would force him to step down as the head of his publicly traded Harbinger Group. It’s also seeking the return of ill-gotten gains and civil penalties from Falcone and Harbinger.

The suit is the latest in a string of embarrassments for Falcone. In May, his biggest investment, wireless startup LightSquared, filed for Chapter 11 bankruptcy.

The SEC yesterday also charged Falcone with market manipulation tied to bonds he traded in 2006 and 2007, and with wrongfully favoring certain investors’ redemption requests over others.

In addition, the SEC charged Peter Jenson, Harbinger’s former COO, with aiding and abetting Falcone’s improper loan.

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Tuesday, June 26, 2012

TV inquiry

DirecTV and Dish Network have received requests from the US Justice Department about pricing contracts with television networks, part of a broader federal probe into whether pay-TV companies are squeezing out Internet-video rivals, according to three people with knowledge of the matter.

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Monday, June 25, 2012

NBA will investigate Knicks' Stoudemire for homosexual slur to fan on Twitter: sources

The NBA held its first annual social media awards last week to commend the best tweeters, with the Knicks’ Jeremy Lin and Landry Fields copping honors. Now the league is looking into the dark side of player Twitter interaction with fans.

A source told The Post the NBA plans to look into the authenticity of a profane direct message allegedly sent by Amar’e Stoudemire to a fan over the weekend. Stoudemire allegedly called the fan a homosexual slur in the direct message, which was forwarded to Deadspin.com via photo.

A Twitter direct message is visible only to the recipient, unlike a normal Twitter post which can be seen by anyone.

The fan ignited Stoudemire’s alleged reply by saying he must step up this season in harsh tones. “You better come back a lot stronger and quicker to make up for this past season, dead[butt].’’

Stoudemire’s alleged reply was: “[Expletive] you. I don’t have to do anything [slur].’’

Stoudemire’s spokesperson did not return several messages the past two days seeking comment on whether Stoudemire actually sent the message.

Deadspin later reported Stoudemire apologized to the fan in a subsequent direct message but after the story had come out yesterday. “I apologize for what I said earlier,” Stoudemire allegedly messaged. “I just got off the plane and had time to think about it. Sorry bro!! No excuses. Won’t happen again.”

Another Knicks fan, Drew Austin, told The Post yesterday he had a testy direct message exchange two weeks ago.

Austin questioned Stoudemire sitting courtside in Miami for a playoff game vs. the Celtics. Stoudemire replied four times, tweeting, in part, “You can’t control my life. Don’t breathe down my neck. I’m not a rookie. You have much more to worry about than another man.’’

Austin informed Tommy Dee, who runs a prominent online destination for Knicks fans, The Knicks Blog. Dee posted one part of the exchange two weeks ago. The Post obtained the alleged Stoudemire direct messages yesterday.

Yesterday, Austin said, “I’m not the first person who has told me Amar’e has direct messaged them in that tone. He seems very sensitive and defensive with the fans, insecure or something.’’

Stoudemire is coming off hand surgery during the playoffs when he punched a glass-enclosed fire extinguisher following a Game 2 loss in Miami. He missed Game 3 and played with one hand heavily bandaged in Games 4 and 5.

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Sunday, June 24, 2012

Failed Deal Ensnares Mandela's Grandson

Miners at a gold mine in Orkney, South Africa had hoped the political ties of the new owners, including a grandson of Nelson Mandela, would translate into business and better conditions. It hasn't turned out that way. WSJ's Devon Maylie reports.

ORKNEY, South Africa—Zondwa Mandela set out to make his company one of the African continent's biggest gold producers. Now, the 28-year-old grandson of Nelson Mandela faces fraud charges related to a failed mining deal and angry unemployed workers who accuse him of trading on the name of South Africa's first black president.

The younger Mandela grew up among the freedom fighters who ended white-minority rule in South Africa and shaped the country's democratic landscape. But while his grandfather focused on politics, Zondwa Mandela, like some other revolutionary offspring, found business more appealing.

His ambitions led him from a small marketing company to the formation of Aurora Empowerment Systems Ltd., a partnership with another scion of South Africa's political elite, Khulubuse Zuma, a nephew of South Africa's current president, Jacob Zuma.

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Devon Maylie/The Wall Street Journal

Union representative Pelembe Paul, left, speaks to former workers at the defunct Orkney mine in South Africa.

In late 2009, the politically connected pair won the rights to operate two bankrupt mines outside Johannesburg by bidding to eventually purchase the mines for 605 million rand ($72 million).

Aurora said it had only to secure the funding to buy the mines outright, which was a condition of winning the bid to operate them. The mines were auctioned off by liquidators working on behalf of bankrupt mining company Pamodzi Gold.

Mr. Mandela boasted at the time that the deal would form the foundation of an empire to rival industry giant Anglogold Ashanti Ltd. "As long as we manage our operations correctly," he told reporters in Johannesburg, "nothing will stop us."

But funding for purchasing the mines never materialized, and the company's existing funds weren't enough to operate them. Neither Mr. Mandela nor Mr. Zuma had any mining experience, and Aurora was soon mired in debt. Aurora, which is itself now in bankruptcy, had been chosen by the liquidator for Pamodzi Gold to take on the mines and pay the mines' bills.

Instead, over the next year, the venture stopped paying contractors and worker salaries and stripped the mines of crucial equipment, according to the liquidator representing Pamodzi Gold and former mine employees.

Now, the Pamodzi Gold liquidator, Icon Insolvency, is suing Mr. Mandela and other Aurora managers for 1.7 billion rand in unpaid bills and services because Aurora allegedly failed to fulfill its promises to run the mines on behalf of the bankrupt Pamodzi.

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Devon Maylie/The Wall Street Journal

Potholes dot the road leading out of the Orkney mine.

Those civil fraud charges against Messrs. Mandela and Zuma and other managers were filed in May by the liquidator and are scheduled to go to court after the Aurora managers file an opposing affidavit due next week.

Aurora executives say they did nothing wrong and maintain that the search for investment capital in the middle of a global financial crisis was always going to be an uphill battle, despite surging gold prices at the time. "Nothing sinister was done," said Aurora's former commercial director, Thulani Ngubane.

But the Aurora case and the involvement of Messrs. Mandela and Zuma have given ammunition to critics who charge that politically connected deals in South Africa are trumping any real progress bringing historically disadvantaged South Africans into the economic mainstream.

The liquidator for Pamodzi Gold said Aurora was selected in part because it met Black Economic Empowerment policy requirements. The BEE system requires firms to meet benchmarks such as black ownership, skills training and development in poor communities.

Aurora's pitch to buy the mines also was the better offer because it included keeping all of the employees on board, the liquidator said in the May filing.

One person involved in the process, who spoke on condition of anonymity, said Aurora's political connections did indirectly influence the decision amid fears of repercussions if they weren't selected.

Critics and public commentators in South Africa say the Aurora case failed the BEE system. In an April column, a lawyer on BEE deals, Thabo Masombuka, said the Aurora case is "distasteful and unforgiveable" because of the way it harmed the financial livelihood of "ordinary" workers.

Aurora was liquated by the North Guateng High Court in October 2011.

The soured mining investment has enraged workers and union leaders, and some of them have directed their ire at the grandson of the man who delivered political freedom to black South Africans.

"The big names are stripping our people as if they do not have consciences," Zwelinzima Vavi, head of Cosatu, South Africa's biggest trade union, said when he visited one of the mines recently.

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Devon Maylie/The Wall Street Journal

An unused barracks at the mine

Zondwa Mandela declined to comment. Lawyers for Khulubuse Zuma didn't respond to requests to comment.

The fallout from the failed mining deal is evident here at the defunct mine in Orkney, a two-hour drive southwest of Johannesburg across an expanse of flat farmland. The mine is one of the two that Aurora won the right to operate in 2009 and then failed to get back on track. By February 2010, former workers at the Orkney mine say, Aurora had stopped paying them. In April 2011 electricity to their barracks was cut.

Dozens of former miners are still living at the closed Orkney mine in brick barracks without electricity, unable to find jobs elsewhere. They survive on food donations from local charities and promises from union organizers that a new buyer for the mine will emerge soon. After Messrs. Mandela and Zuma failed to deliver on promises, workers are concerned about the fate of the mine and themselves.

"They were liars, I'm sorry to say, professional liars," former worker and union leader Pelembe Paul said of Aurora's directors. "Someone can give them a diploma, a degree in lying."

Solly Phetoe, regional head of the Cosatu union that represents most of the mine's workers, said he believes Aurora's managers had no interest in mining and only wanted access to equipment they could sell as scrap metal.

These days, Mr. Mandela is keeping a low profile. He has avoided many of the company's liquidation hearings and hasn't commented on the mines publicly since his early, jubilant press conference.

Mr. Ngubane, Aurora's commercial director, said the company's leaders weren't being malicious or negligent but that they inherited more workers than the mines could support, given the amount of gold they were producing. Tight funding for mining deals amid the global financial crisis added to the odds stacked against the company, he said.

"Because of what happened here, it made it difficult to pursue other deals," Mr. Ngubane added.

The second mine, east of Johannesburg in Grootvlei, was sold in April for $8.4 million to a small South African mining company called Gold One International Ltd., which already owned a mine nearby. Gold One's chief executive, Neal Froneman, said the mine shafts are ruined because Aurora stopped paying to have water pumped out of them daily. So the company is planning to drill a whole new set of shafts.

"A lot of destruction," Mr. Froneman said, "took place in the last two years."

Write to Devon Maylie at devon.maylie@dowjones.com and Patrick McGroarty at patrick.mcgroarty@dowjones.com

Printed in The Wall Street Journal, page B1

A version of this article appeared June 23, 2012, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: Nelson Mandela's Grandson Comes Under Fire for Failed Mining Deal.

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Saturday, June 23, 2012

Fueling the fire, Mets' Francisco says Yankees 'complain too much'

Frank Francisco is still bringing the high heat.

A day after calling the Yankees "chickens" in an exclusive interview with The Post, the Mets closer didn't back down one bit Friday before the first game of this weekend's Subway Series.

"I make a simple comment because they complain a lot, for every call, for every thing," Francisco said.

Francisco said his Mets teammates had a "chicken song" playing as he entered the clubhouse Friday afternoon. He did say he respects the Yankees, but didn't amend his "chickens" statement at all. Instead, he added fuel to the fire.

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Yankees center fielder Curtis Granderson and Mets Third Baseman David Wright attend Delta Air Lines' Third Annual Delta Dugout at Grand Central Station In Celebration Of The Subway Series.

"I think they complain too much for everything," Francisco said.

Earlier in the day, players from both the Mets and Yankees addressed Francisco’s “chicken” comments, and the reactions to the Mets closer’s words were a bit surprising.

Yanks outfielder Curtis Granderson did not seem to be jarred by being called out by Francisco, who said he “can’t wait to face those chickens.”

“No, [the comments didn't bother me] at all,” Granderson told The Post. “I think it’s great that guys get a chance to talk about it. You’re supposed to feel confident, you’re supposed to be able to go out there and say ‘We’re going to win.’ You don’t want the other team to win.”

PHOTOS: BEST SUBWAY SERIES MOMENTS

Granderson seemed happy that there has been some juice added to this weekend’s Subway Series with the Mets at Citi Field.

“I think it’s great, add fuel to the rivalry, help add to the fire between the two teams,” Granderson said. “Any time you have something to say about your team...you should go out there and have all of the confidence in the world to say it.”

Granderson’s sentiments were not exactly echoed by Mets third baseman David Wright. During an appearance Friday morning at the Delta Dugout in Grand Central Terminal, where fans can catch the entire Subway Series, Wright seemed a bit wary about prodding Granderson and the Yankees hitters.

“Obviously I have a tremendous amount of respect for the Yankees, I don’t know if you want to get those guys too riled up, they have a great offense,” Wright told The Post.

Wright, who leads the Mets with a .358 batting average, did hope that Francisco, who also added that he wants to “strike out the side" against the Yankees, can back up his bold statement.

“I’m glad Frankie is as confident as he is,” Wright said. “I hope he does get the chance to go in there for the save, because that means we’re winning in the ninth, so I hope that he does get to back those comments up.”

The Post exclusively reported Friday that Francisco had commented on facing the Yankees this weekend in the second leg of the Subway Series.

Francisco quickly quieted down the chatter, saying “I think I’ve said too much already,” when asked to elaborate.

The Yankees swept the Mets two weekends ago in The Bronx, kicking off a 10-game winning streak for the Yankees and a wild ride for the Mets, who have alternated sweeps for the past four series.

“It’s just been incredible, I don’t know if I’ve ever been a part of something so much like a roller coaster ride,” Wright said. “From sweeping to getting swept to sweeping and they’re [against] good teams. I think it’s a great series and we’re going to need all of the momentum going into this and obviously [the Yankees] showed that playing well against us.”

Since rattling off 10 straight, the Yankees have dropped their past two games against the Braves and will look to prevent extending the losing streak when they take the field tonight against the Mets.

“The main thing is it's just baseball being baseball, you have to just take everything as it goes, you have to forget about yesterday,” Granderson said. “The great thing about this game is you get to play almost every day and no matter what, you can’t look too far ahead. Today’s the most important day, after we handle today, we can move forward into Saturday.”

Despite not looking past tonight’s game, Granderson did hint that he thinks there’s a chance the Yankees and Mets will not have seen the last of each other after Sunday.

“[A World Series meeting] is definitely possible; anything is possible in this game," Granderson said. "We have around 100 games left to play,”

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Thursday, June 21, 2012

Hondo: Phil fills the bill

Semi-sizzling Hondo posted another gain in light betting last night as his bullishness on the Tigers was rewarded with a victory that slashed the deficit to 1,270 crosettis.

Today, wrapping things up early with a Stadium matinee, Mr. Aitch will hop on Hughes & Co. to humble Hanson – 10 units.

-$

John Kerry reportedly will play the role of Mitt Romney in Obama’s mock debates. That seems like a terrible case of miscasting – Kerry’s mopey horse face is way too long and morose for the role . . . Roger Clemens owes absent-minded Andy Pettitte a huge debt of gratitude for forgetting at trial what Clemens said he misremembered in the first place . . . Memo to Angry Alec Baldwin (from photographers everywhere): FOR THE LOVE OF GOD, MAN, MEDICATE NOW!!!

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