Author Archives: Emily Holbrook

About Emily Holbrook

Emily Holbrook is a former editor of the Risk Management Monitor and Risk Management magazine. You can read more of her writing at EmilyHolbrook.com.
Игроки всегда ценят удобный и стабильный доступ к играм. Для этого идеально подходит зеркало Вавады, которое позволяет обходить любые ограничения, обеспечивая доступ ко всем бонусам и слотам.

The Risks of Social Media: Legal Limits

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As we all know by now, social media can be both a great marketing and networking tool, as well as a good excuse for employment termination if mishandled — or worse, a lawsuit.

For instance, did you know that the Federal Trade Commission is watching those social media sites that promote a product or service? In the FTC’s December 2009 guidelines, it states that, among other things, those promoting a product/service on the internet (via Facebook, Twitter or any other form of social media) must incorporate a disclosure page or statement telling of the financial agreement between those giving testimonials about the product/service and the company itself.

Under the Guidelines, endorsements must reflect the genuine beliefs or opinions of the endorser and cannot otherwise be deceptive. In addition, the endorser must be a bona fide user of anything given of value to the endorser. For example, a blogger who reviews a product given to her for that purpose should disclose that it was provided by the manufacturer, and not purchased. Most do not follow this simple rule.

Understanding the legal implications of what is presented on your social media site can be confusing. To break it all down for us, Law.com issued a nice online article this morning, entitled “Minimizing the Legal Risks of Using Online Social Networks.” In our continuing coverage of the risks of social media, I present you with a breakdown of the piece:

  • Copyright: If you are using text, audio, video or images on your site that you did not create yourself, you may be violating an individual’s or organization’s copyright. However, if your posting qualifies as “fair use,” then use of the content will most likely not be questioned. Common situations of fair use include criticism, comment, news reporting and education.
  • Trademark: As the article states, “If you are using another’s trademark, you may be liable for infringement, where the owner can establish that your use of its mark or a mark similar to it will likely cause consumer confusion as to the source of the material.” And if it is proven that your conduct diluted the strength of the owner’s trademark, there may be potential for further liability.
  • Defamation: This is a huge topic in the realm of social media and the risks involved. In general terms, a defamatory statement is “a false and disparaging statement about another which causes injury to reputation (or in some cases causes emotional distress).” Along with individuals, businesses and products can also be defamed, sometimes causing reputation and financial damage (cue lawsuit).
  • Confidentiality: This section is geared towards those whose profession involves confidentiality agreements (lawyers, doctors, advisers, etc.). If there is proof of a breach of this agreement, possible sanctions “may include termination of employment, loss of professional license, potential significant civil liability (such as in the context of trade secret dissemination), or even criminal liability.”

These are just a few of the potential legal risks of social media. And as society continues to move to even more of an online presence (for both personal and business aspects), we will continue to learn the possible implications of a web 2.0 world.

The Best of the Best: The Top 50 S&P Performers

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With the economy on a slow climb back to (hopefully) pre-recession levels, many companies are seeing an improvement to their battered balance sheets. As Bloomberg Businessweek states, its list of the top 50 “is a reminder of the American economy’s ceaseless ability to renew itself.”

Here is a snapshot of the top 10:

  1. Priceline.com
    Surprised at this ranking? So was I, but it seems that this online discount travel agency has thrived thanks to CEO Jeffery H. Boyd‘s management. Boyd took the helm soon after September 11 and saved the company from what looked like a dismal death. The William Shatner-branded company “reinvented itself and went on to score a total return of 911.9% for shareholders over the past five years.”
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  2. Intuitive Surgical
    This company is rocking in the “computer-assisted surgery market,” helping doctors remove tumors by looking at a monitor that shows robotic arms equipped with scalpels and needles. Its 2009 net income was recorded at $232.6 million.
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  3. Southwestern Energy
    This domestic natural gas exploration and production company is enjoying the limelight (in both revenue and reputation) after its energy industry rival (oil) has been shown in a negative light recently.
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  4. Apple
    A no-brainer here, Apple has consistently ranked high compared to other, high performing companies. As Boston Analytics company, Trefis, states, “sales of iPhones account for nearly half the stock’s value.”
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  5. Salesforce.com
    A power player in the customer relationship management (CRM) software field since its founding in 1999, Salesforce.com has kept up with the continuously changing landscape of technology. The company is set to announce a “set of Facebook-like tools” that will allow users to share data in real time.
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  6. Express Scripts
    This pharmacy benefits company has enjoyed reduced costs and increased profits due in part to CEO George Paz’s application of “behavioral economics” to encourage smarter consumer practices.
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  7. Flowserve
    A dominant company within the diversified machinery industry, Flowserve has thrived by “selling and servicing valves, pumps, seals and other machinery for energy producers.”
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  8. FMC Technologies
    Though 2009 was a prosperous year for this company’s offshore drilling and production technology, the current moratorium on offshore drilling may hurt its bottom line in the short-term.
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  9. Cliffs Natural Resources
    As North America’s number one iron ore producer, this company has benefited from Chinese demand. CEO Joseph A. Carrabba “expects more than $1.5 billion in cash from operations in 2010.”
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  10. Amazon.com
    A veteran in the realm of successful companies, Amazon.com just keeps improving. The company’s sales surged a whopping 28% last year.

For a complete listing Bloomberg Businessweek‘s ranking of the top 50 winning stocks in the S&P 500, click here.

Predicting Earthquakes

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Never heard of USArray? Neither had I until this morning.

USArray is a 15-year old program that places networks of seismographs across the United States that record local, regional and distant earthquakes. Using data from historical “geological hazards” (earthquakes, volcanoes, landslides, etc.) and analyzing continental fault lines, the program works to determine the most earthquake-prone areas.

The project, which involves a traveling network of 400 high-quality, portable seismographs placed in temporary sites, will reach the halfway mark this summer in its goal to measure upheavals beneath the earth’s surface from California to Maine, says project director Bob Woodward.

The findings will give scientists a more detailed picture in regards to earthquake activity in the U.S., New Madrid Seismic Zoneespecially in the Pacific Northwest, an area that has experienced considerable seismic activity within the last several years. The information gathered will not only help scientists understand earthquakes, but will also educate residents of those areas about the dangers of such a catastrophe and could also lead to stricter building codes in such places.

Though earthquakes occur most along the West coast, they are also a common occurrence along the New Madrid seismic zone, an area named after New Madrid, Missouri, where a series of massive earthquakes occurred in 1811 and 1812.

But what if an earthquake were to hit the Northeast? A January 14th Congressional Service Report addressed that question.

The report states that there could be approximately $900 billion in damages, including,  “damage to the heavily populated central New Jersey-Philadelphia corridor if a 6.5-magnitude earthquake occurred along a fault lying between New York City and Philadelphia.”

The USArray project involves a traveling network of 400 portable seismographs that started on the West Coast and is currently moving east.

Before the instruments were installed, “it was kind of like taking a picture with a camera with only a few pixels,” Woodward says. “With 400 stations out there, it’s like having a much higher resolution camera.

So now you can directly see the seismic waves rolling across the country.”

The costliest earthquake in the world (measured by insured losses) was the January 17th, 1994 Northridge, California earthquake, which totaled $15.3 million. With those kind of numbers, any tool to help scientists and society better understand, and possibly predict, earthquakes is invaluable.

AIG: A Timeline to the End of the SEC Probe

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It had to happen sometime. This morning it was announced that U.S. regulators have closed an investigation of AIG and some of its executives over the insurance giant’s near collapse that led to a $182 billion government bailout.

Let’s take a look at the timeline of many of the events surrounding the AIG disaster (with help from ProPublica, the New York Fed and Bloomberg).

  • August 5, 2007: During a conference call with investors, various high-ranking AIG officials stressed the near-absolute security of the credit-default swaps. “The risk actually undertaken is very modest and remote,” said AIG’s chief risk officer. Joseph Cassano, who oversaw the unit that dealt in the swaps, was even more emphatic: “It is hard for us with, and without being flippant, to even see a scenario within any kind of realm of reason that would see us losing $1 in any of those transactions…. We see no issues at all emerging. We see no dollar of loss associated with any of that business.” Martin Sullivan, AIG’s CEO, replied, “That’s why I am sleeping a little bit easier at night.”
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  • October 1, 2007: Joseph St. Denis, the VP of Accounting Policy at AIG Financial Products, resigns after Cassano tells him, “I have deliberately excluded you from the valuation of the [credit-default swaps] because I was concerned that you would pollute the process.”
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  • November 7, 2007: In an SEC filing, AIG reports $352 million  in unrealized losses from its credit-default swap portfolio, but says it’s “highly unlikely” AIG would really lose any money on the deals.
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  • December 5, 2007: In an SEC filing, AIG discloses $1.05 billion to $1.15 billion in further unrealized losses to its swaps portfolio, a total of approximately $1.5 billion for 2007. During a conference call with investors, CEO Martin Sullivan explains that the probability that AIG’s credit-default swap portfolio will sustain an “economic loss” is “close to zero.” AIG’s risk-modeling system had proven “very reliable,” Sullivan said, and since the transactions were so “conservatively structured,” AIG had “a very high level of comfort” with its risk models.
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  • February 28, 2008: In its year-end regulatory filing, AIG sets its 2007 total for unrealized losses at $11.5 billion. AIG also discloses that it had thus far posted $5.3 billion in collateral. It’s the first time the company has disclosed the amount of posted collateral. AIG puts the notional value of the entire swaps portfolio at $527 billion. But as we said above, about $61 billion of the swaps had exposure to subprime mortgages. AIG also announces that Joe Cassano, the chief of the unit that dealt in the swaps, has resigned. What AIG doesn’t disclose is that he’s kept on under a $1 million per month consulting contract.
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  • August 6, 2008: In its second quarter filing, AIG ups its unrealized loss in 2008 from the credit-default swaps to $14.7 billion, for a grand total loss of $26.2 billion. It also discloses another impressive number: It’s posted a total of $16.5 billion in collateral.
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  • September 16, 2008: The Federal Reserve Board saves AIG by pledging $85 billion [11]. As part of the deal, the government gets a 79.9 percent equity interest in AIG.
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  • October 8, 2008: The Fed pledges another $37.8 billion to AIG.
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  • November 10, 2008: Board of Governors and Treasury announce the restructuring of the government’s financial support to AIG. The restructuring includes a Treasury purchase of AIG preferred shares through the Troubled Asset Relief Program (TARP), reduction of $85 billion revolving credit line to $60 billion and the creation of two limited liability companies (LLCs) to lend against AIG’s residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs).
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  • March 15, 2009: AIG, under pressure from regulators, releases a statement that discloses the names of its counterparties, which includes banks such as Goldman Sachs and Deutsche Bank AG. The counterparties received about $50 billion in forfeited collateral postings and Maiden Lane III payments since the Sept. 16, 2008, rescue, the statement says. The statement lists a sum of payments to each bank. It doesn’t identify the securities tied to the swaps or list the value of individual purchases by the banks.
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  • March 18, 2009: AIG Chairman and Chief Executive Officer Edward Liddy testifies before House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises.
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  • March 24, 2009: Federal Reserve Chairman Ben S. Bernanke and New York Fed President William C. Dudley testify before House Committee on Financial Services.
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  • May 7, 2009: AIG reports first quarter 2009 earnings. (Risk Management Monitor coverage)
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  • May 21, 2009: Edward Liddy leaves AIG after eight grueling months acting as chairman and CEO with no pay. (Risk Management monitor coverage)
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  • December 13, 2009: Eli Lehrer writes an editorial entitled “Kill AIG Now.” (Read Risk Management Monitor’s reaction to the piece, plus an in-depth comment from Lehrer himself)
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  • Jan. 7, 2010: Bloomberg reports that e-mails obtained by Representative Darrell Issa show the New York Fed pressed AIG to withhold details from the public about the insurer’s payments to banks.
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  • March 1, 2010: AIG agrees to sell its subsidiary American International Assurance Company Ltd. (AIA) to Prudential Financial, Inc. for approximately $35.5 billion.
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  • March 8, 2010: AIG agrees to sell its subsidiary American Life Insurance Company (ALICO) to MetLife, Inc. for approximately $15.5 billion.
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  • June 10, 2010: A Congressional watchdog criticized nearly every move the Fed has made during the AIG fiasco. “The government’s actions in rescuing AIG continue to have a poisonous effect on the marketplace,” said the congressional oversight panel led by Harvard University law professor Elizabeth Warren.
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  • June 17, 2010: The SEC ends its probe of AIG and its executives.

No charges were ever filed against AIG or its executives, and since the Justice Department’s probe ended and May and the SEC’s probe ended today, no charges will likely ever be filed.

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