Foreclosure pace nears decade high

The state's increase could soon pull down home prices and even bring a recession, some economists say.
LATIMES
Nearly 900 Californians a week are losing their homes because they can't afford to pay the mortgage — up from about 100 a week a year ago — providing fresh evidence that the housing market's troubles are nowhere near over.

The surge is raising concerns that home prices will soon suffer as a result. The 11,033 foreclosures in the first three months of the year represent an 800% increase over the same period a year earlier.

In addition, 46,760 homeowners were sent default notices in the first quarter, DataQuick Information Systems reported Monday. A default notice is a warning from a lender to catch up on payments immediately or face eviction.

Foreclosures and default warnings are at their highest points in nearly a decade, the La Jolla-based real estate data tracker said.

So far, the effect on home values has been muted. But as the number of move-outs, evictions and forced sales continue to increase, some economists say they will soon start to push prices down.

First to fall will be the low-income communities where marginal loans proliferated, they say. The trend will spread like a virus to more affluent neighborhoods.

The most pessimistic think a housing bust will wound the economy.

"For this rise in foreclosures to be happening in the midst of a strong labor market is truly unique and scary," said analyst Christopher Thornberg of Beacon Economics.

He predicts foreclosures will top out at four or five times the current level — enough, he says, to either induce a recession or at least bring the economy to the precipice.

Other experts aren't exactly optimistic but believe that the situation is more ambiguous. They say the state's low unemployment rate of 4.8% and generally healthy economy will absorb trouble, up to a point.

"My gut is the correction we are seeing is regional and very spotty," said Patrick Veling, president of Real Data Strategies in Brea.

Generally, the places with the cheapest housing in the state — including the Inland Empire and Central Valley — are faring the worst.

In Riverside and San Bernardino counties, the combined volume of foreclosures rose to 2,369 in the first quarter from 255 in the same period last year. The Central Valley, which includes Sacramento County, jumped to 3,039 from 286.

Another problem spot is San Diego County, where the 1,183 foreclosures is the highest since DataQuick began tracking this information in 1988. The county's market peaked earlier than the rest of the state.

Los Angeles County, the largest housing market in the state, is surprisingly strong. The default rate is almost 60% below the first-quarter 1996 peak, DataQuick said.

Most of the loans going into default now were made at the peak of the housing boom in 2005, when some thought the good times would continue forever and lending standards were lax. Nearly 80% of loans made in the state in May 2005 for the purpose of purchasing houses had adjustable rates, a record high.

Many of these mortgages required the borrowers to put little or no money down, and lenders took their word for whatever income they said they made.

For a moment, everything was fine. Then housing prices stopped going up — meaning that many of these borrowers did not have enough equity or income to refinance to a new loan. Others in foreclosure may be able to afford the payments, but have chosen not to make them because their homes are worth less than they paid.

Foreclosures peaked at 15,418 in the third quarter of 1996, at the tail end of the last big slowdown in the state. They bottomed out at 637 in the second quarter of 2005, as the most recent boom was cresting.

The peak for default warnings was in the first quarter of 1996, with 61,541. The 46,760 warnings reported for the first three months of this year is up 148% from the same period last year.

Compared with the mid-1990s, however, the state's population and housing stock have grown modestly.

The sharp rise in foreclosures has become a political issue, with Congress debating methods of aiding those underwater.

There's little precedent for the current wave of foreclosures. Traditionally, people lose their jobs, and then they lose their houses. In the early '90s, the aerospace industry's collapsetriggered a broad recession.

This time, the foreclosures are happening first — and fast.

"It surprises me, the speed at which all this is evolving," said Edward Leamer, director of the UCLA Anderson Forecast.

He sees plenty to worry about. For instance, the recent tightening of loan standards is, for better or worse, eliminating a lot of the fuel that powered the bottom of the market. Entry-level buyers are priced out, which means existing owners have a harder time selling their homes to move up. Eventually, everyone is vulnerable.

"The housing sector is in trouble for a considerable period," Leamer concluded, "but the rest of the economy will muddle through."

In its March housing report last week, DataQuick reported that the median price for homes sold in Southern California was up 4.6% from March 2006 despite a sharp drop in sales.

Because the houses that aren't selling tend to be the cheaper ones, that automatically pushes up the median. Housing bears say a rising median can mask a sinking market.

Even taking this into account, however, the market appears healthier than one might expect.

Sales in the three lowest segments of the market plunged by about 50% in March from March 2006, according to new DataQuick statistics. Yet the median prices in those categories were, on average, unchanged from a year earlier.

"Prices are going sideways," said Veling of Real Data Strategies.

He wondered whether the mood was worse than the reality, adding that the boom went on so long that people's memories are distorted.

"It's been so long since we've seen a normal market that we've forgotten what it looks like," he said.

Gasoline prices drive up U.S. inflation

CBCNEWS
The closely watched U.S. consumer price index rose by 0.6 per cent in March, up from 0.4 per cent in February and the sharpest jump in nearly a year.

The U.S. Labour Department said prices were pushed up by gasoline, which rose 11 per cent last month. The 5.9 per cent increase in energy costs was the biggest one-month increase since September 2005, when Hurricane Katrina shut down Gulf Coast refineries.

Food price increases moderated following two big months of gains spurred by crop damage.

Excluding such volatile components as food and energy prices, the index rose 0.1 per cent in March, the smallest rise in the so-called core rate of inflation in three months.

Analysts had been expecting the core rate to rise by 0.2 per cent. Market watchers say the cooler core rate gives the U.S. Federal Reserve more reason to hold steady with interest rates.

"Looking forward, there is reason to think that the inflation trend could continue downward," said TD Securities strategist Eric Lascelles in a commentary.

"As inflation risks continue to diminish in the future, we think the odds of eventual rate cuts substantially outweigh the odds of additional hikes in the U.S."

Police beat Putin foes at rally

ap
MOSCOW — Riot police beat and detained protesters as thousands defied an official ban and attempted to stage a rally Saturday against President Vladimir V. Putin’s government, which opponents accuse of rolling back freedoms Russians have enjoyed since the end of Soviet communism.

A similar march planned for today in St. Petersburg has also been banned by authorities.

A coalition of opposition groups organized the “Dissenters March” to protest the economic and social policies of Putin as well as a series of Kremlin actions that critics say has stripped Russians of many political rights. Organizers said about 2,000 demonstrators turned out.

Thousands of police officers massed to keep the demonstrators off landmark Pushkin Square in downtown Moscow, beating some and detaining many others, including Garry Kasparov, the former world chess champion who has emerged as the most prominent leader of the opposition alliance.

Police said 170 people had been detained but a Kasparov aide, Marina Litvinovich, said as many as 600 were — although about half were released quickly. Kasparov, whom witnesses said was seized as he tried to lead a small group of demonstrators through lines of police ringing the square, was freed late Saturday after he was fined $38 for participating in the rally.

“It is no longer a country . . . where the government tries to pretend it is playing by the letter and spirit of the law,” Kasparov said outside the court building, appearing unfazed by his detention.

“We now stand somewhere between Belarus and Zimbabwe,” he said.

It was the fourth time in recent months that anti-Putin demonstrations — all called Dissenters Marches — have been broken up with force or smothered by a huge police presence.

The weekend’s marches were being closely watched as a barometer of how much of a threat, if any, opposition forces pose to the Kremlin as Russia prepares for parliamentary elections in December and a presidential vote next spring.

Putin, whose second and last term ends in 2008, has created an obedient parliament and his government has reasserted control over major television networks, giving little air time to critics.

TV newscasts Saturday reported the protests, but gave as much or more time to a pro- Kremlin youth rally held near Moscow State University.

Later, police charged into a crowd of about 200 demonstrators outside the police precinct where Kasparov was being held, beating protesters with nightsticks and fists.

Kasparov and his allies mustered, by their own reckoning, about 2,000 people — far fewer than the 30,000 people who patronize the McDonald’s restaurant at Pushkin Square on an average day.

But some protesters said they were not discouraged by the small turnout or intimidated by the overwhelming force marshaled to block the rally.

Andrei Illarionov, a former Putin economic adviser who has become a Kremlin critic, pointed out that in 1968, only six people appeared in Red Square to protest the Soviet invasion of Czechoslovakia.

“This is a crime against the Russian constitution,” he said. “This country is not free anymore and the main criminal in Russia right now is the authorities.”

Organizers sought permission to gather on Pushkin Square, a traditional site for protests, but city officials rejected the request. Instead, they approved Turgenev Square, about a mile east and away from the city’s commercial and cultural hub.

Organizers refused to cancel plans for the Pushkin Square rally and protesters started to arrive before 11 a.m. Police began seizing them a few at a time.

A 23-year-old woman, who gave her name only as Maria, said she and her husband, Andrei, were coming out of the subway when officers grabbed him.

“We didn’t do anything,” she said, tears rolling down her face as she watched her husband being hustled into a police truck. “We just wanted to see what would happen.”

Four Hired Guns in an Armored Truck, Bullets Flying, and a Pickup and a Taxi Brought to a Halt. Who Did the Shooting and Why?

WASHINGTON POST
On the afternoon of July 8, 2006, four private security guards rolled out of Baghdad's Green Zone in an armored SUV. The team leader, Jacob C. Washbourne, rode in the front passenger seat. He seemed in a good mood. His vacation started the next day.

"I want to kill somebody today," Washbourne said, according to the three other men in the vehicle, who later recalled it as an offhand remark. Before the day was over, however, the guards had been involved in three shooting incidents. In one, Washbourne allegedly fired into the windshield of a taxi for amusement, according to interviews and statements from the three other guards.

Washbourne, a 29-year-old former Marine, denied the allegations. "They're all unfounded, unbased, and they simply did not happen," he said during an interview near his home in Broken Arrow, Okla.

The full story of what happened on Baghdad's airport road that day may never be known. But a Washington Post investigation of the incidents provides a rare look inside the world of private security contractors, the hired guns who fight a parallel and largely hidden war in Iraq. The contractors face the same dangers as the military, but many come to the war for big money, and they operate outside most of the laws that govern American forces.

The U.S. military has brought charges against dozens of soldiers and Marines in Iraq, including 64 servicemen linked to murders. Not a single case has been brought against a security contractor, and confusion is widespread among contractors and the military over what laws, if any, apply to their conduct. The Pentagon estimates that at least 20,000 security contractors work in Iraq, the size of an additional division.

Private contractors were granted immunity from the Iraqi legal process in 2004 by L. Paul Bremer, head of the Coalition Provisional Authority, the U.S. occupation government. More recently, the military and Congress have moved to establish guidelines for prosecuting contractors under U.S. law or the Uniform Code of Military Justice, but so far the issue remains unresolved.

The only known inquiry into the July 8 incidents was conducted by Triple Canopy, a 3 1/2 -year-old company founded by retired Special Forces officers and based in Herndon. Triple Canopy employed the four guards. After the one-week probe, the company concluded that three questionable shooting incidents had occurred that day and fired Washbourne and two other employees, Shane B. Schmidt and Charles L. Sheppard III.

Lee A. Van Arsdale, Triple Canopy's chief executive officer, said the three men failed to report the shootings immediately, a violation of company policy and local Defense Department requirements for reporting incidents. He said Triple Canopy was unable to determine the circumstances behind the shootings, especially since no deaths or injuries were recorded by U.S. or Iraqi authorities.

"You have to assume that, if someone engages, he is following the rules and that he did feel a threat," Van Arsdale said, adding that conflicting accounts, delays in reporting the incidents and lack of evidence made it impossible to determine exactly what provoked the shootings. Triple Canopy officials said they have lobbied for more regulation of contractors since 2004 to better define how incidents such as the July 8 shootings are reported and investigated.

Many details about the shootings are in dispute. This account is based on company after-action reports and other documents, court filings, and interviews with current and former Triple Canopy employees, including all four men riding in the armored Chevrolet Suburban that day.

Schmidt and Sheppard said they were horrified by what they described as a shooting rampage by Washbourne and waited two days to come forward because they feared for their jobs and their lives. The two have sued Triple Canopy in Fairfax County Circuit Court, arguing that the company fired them for reporting a crime.

But another man in the vehicle, Fijian army veteran Isireli Naucukidi, said Sheppard, who was driving, cut off the taxi on Washbourne's orders, giving him a better shot. Naucukidi said the three American guards laughed as they sped away, the fate of the Iraqi taxi driver unknown. Schmidt told Washbourne, "Nice shot," according to Naucukidi.

Naucukidi also said that Schmidt was responsible for an earlier shooting incident that afternoon involving a white civilian truck, and that he believed Schmidt and Sheppard had blamed Washbourne to cover up their own potential culpability. Schmidt denied responsibility for that shooting but acknowledged in an interview he had fired a warning shot into the grille of a car on a separate airport run that morning and had failed to report it.

Naucukidi left Triple Canopy on his own shortly after the incidents occurred. Company officials said he was not fired because, unlike the three other guards, he had reported the shootings immediately. During an interview on the Fijian island of Ovalau, where he farms, Naucukidi said he decided not to return to Triple Canopy because "I couldn't stand what was happening. It seemed like every day they were covering something" up.

The presence of heavily armed guards on the battlefield has long been a wild card in the Iraq war. Insurgents frequently attack them. Iraqi civilians have expressed fear of their sometimes heavy-handed tactics, which have included running vehicles off the road and firing indiscriminately to ward off attacks.

Current and former Triple Canopy employees said they policed themselves in Iraq under an informal system they frequently referred to as "big boy rules."

"We never knew if we fell under military law, American law, Iraqi law, or whatever," Sheppard said. "We were always told, from the very beginning, if for some reason something happened and the Iraqis were trying to prosecute us, they would put you in the back of a car and sneak you out of the country in the middle of the night."

Naucukidi said the American contractors had their own motto: "What happens here today, stays here today."

June 2: Hilla

Washbourne sported a shaved head, a goatee and a mosaic of tattoos and piercings on his muscular, 6-foot-3-inch frame. He led one of two teams on Triple Canopy's "Milwaukee" project, a contract to protect executives of KBR Inc., a Halliburton subsidiary, on Iraq's dangerous roads. He earned $600 a day commanding a small unit of guards armed with M-4 rifles and 9mm pistols, the same caliber weapons used by U.S. troops.

The men referred to each other by their radio call signs. Washbourne was "JW," his initials. Sheppard, a former U.S. Army Ranger, was "Shrek," for his resemblance to the cartoon monster. Schmidt, a former Marine sniper, was "Happy," an ironic reference to his surly demeanor. Naucukidi was "Isi," an abbreviation of his first name.

Schmidt and Sheppard earned $500 a day. Naucukidi earned $70 a day for the same work.

One of the largest security firms in Iraq, Triple Canopy was known for its elite, disciplined guards, including many Special Operations veterans from all branches of service. The company provides security at some checkpoints inside Baghdad's Green Zone. But Triple Canopy officials said the company is not responsible for protecting the Iraqi parliament building, where a bomb Thursday killed at least one person and wounded at least 20.

On the Milwaukee project, Washbourne came to symbolize a lack of discipline that was a departure from the company's approach, according to several current and former employees.

Unlike the U.S. military, which prohibits drinking, Triple Canopy employees ran their own bar, called the Gem, inside the Green Zone. Washbourne sometimes drank so heavily his subordinates had to roust him for his own operations briefings, four current and former employees said. Washbourne said he drank, but seldom to excess.

An incident a month before the shootings underscored doubts among his colleagues about Washbourne's leadership, several of them said. On June 2, Washbourne was leading a convoy to a State Department compound in Hilla, about 60 miles south of Baghdad. The Suburban in which he was a passenger jumped a curb at a high rate of speed, shattering the axles and halting the exposed SUV in the middle of the highway.

A blue civilian truck suddenly flew around a blind curve and headed toward the convoy, according to Washbourne and Naucukidi, who was riding with him that day. Washbourne fired more than a dozen rounds into the oncoming truck with his M-4, wounding the driver. He later said he felt threatened. Washbourne then insisted on torching his damaged SUV with incendiary grenades instead of having it towed.

Washbourne said he was following standard operating procedure, which calls for a vehicle to be destroyed once it is disabled to prevent it from falling into the hands of insurgents.

Naucukidi said Washbourne ordered the guards to tell investigators that the convoy had been attacked by insurgents, even though many of them believed it had merely been involved in a traffic accident. Washbourne insisted that a small explosion precipitated the incident and that the SUV had been run off the road by another vehicle.

When the team returned to Baghdad, Naucukidi said, it was met by Ryan D. Thomason, a close friend of Washbourne's who was serving as acting project manager.

"What happens here today, stays here today," Thomason said, according to Naucukidi. "Good job, boys."

Thomason instructed the team not to discuss the incident for security reasons, said his attorney, Michael E. Schwartz. Triple Canopy recently opened a separate investigation into the incident after new information about it surfaced during litigation over the July 8 shootings.

July 8: Baghdad Airport

The July 8 afternoon run was to be Washbourne's last before he returned to Oklahoma. The team was to travel to Baghdad International Airport to pick up a client, then return to the Green Zone.

Washbourne, as team leader, led a pre-mission briefing in the parking lot. As the briefing concluded, according to Naucukidi, Washbourne cocked his M-4 and said, "I want to kill somebody today."

Naucukidi said he asked why. He recalled that Washbourne replied: "Because I'm going on vacation tomorrow. That's a long time, buddy."

In an incident report that he later submitted to Triple Canopy, Sheppard wrote that Washbourne also informed him that he was "going to kill someone today." In an interview, Schmidt said he heard a similar remark. Washbourne denied making any comment about his hope or intention to kill that day.

Naucukidi said he didn't take the comment seriously, because Washbourne frequently made similar jokes. "He did this really every mission: 'Okay, let's go shoot somebody,' " Naucukidi said.

Washbourne sat in the front passenger seat of the "follow" vehicle -- the third Suburban in a three-truck convoy, which included a lead vehicle, filled with guards, and what they called the "limo," a Suburban used to ferry the client. Sheppard drove. Schmidt and Naucukidi sat behind them facing backward to protect against a rear attack.

The four men agree on what happened next. The convoy arrived at Checkpoint 1, just outside the airport, and set up a blocking position to allow the lead vehicle and the "limo" to proceed through the checkpoint. The contractors noticed a small white pickup truck moving up slowly behind them from a distance of about 200 yards.

At this point, the stories diverge.

Naucukidi said Sheppard moved the Suburban to give Schmidt a better view. Naucukidi said that he and Schmidt tried to warn the white truck to stop but that it was still moving forward when Schmidt fired three times with his M-4. He said the truck stopped immediately but was still too far away for the men to see where the bullets hit.

Naucukidi also said the truck was too far away and was moving too slowly to pose a threat.

Schmidt and Sheppard waited two days before coming forward, then gave nearly identical accounts of what happened. Both said that it was Washbourne who shot at the white truck and that he fired intentionally into the windshield. "His intention was to kill," said Schmidt, who claimed he saw a "splash" of glass from the bullets striking the windshield.

Schmidt and Sheppard said Washbourne warned them not to mention the incident, quoting him as saying, "That didn't happen, understand?"

Washbourne said he only recalled firing two warning shots at a much larger white truck in an incident during a different run that morning. Naucukidi said he believes Washbourne is confusing that shooting with yet another incident that had occurred at the same location a few days earlier.

"There was no comments about 'That didn't happen, you understand,' or anything," Washbourne said.

"I am not a clever or witty man; I don't say things like that," he said. "And I'm not a morbid or sadistic" person.

July 8: Route Irish

The convoy continued through the checkpoint to pick up the KBR executive at the airport. It then left the airport and began the return trip.

Sheppard wrote that he observed "an Ambulance and a lot of activity" where the shooting had taken place. He and Schmidt said Washbourne threatened them again not to say anything.

Washbourne denied making any threats and said no ambulance was parked near the checkpoint. Naucukidi also said he did not see an ambulance.

The convoy continued down the airport road, called Route Irish by the military and contractors, toward the Green Zone. It reached speeds of 80 miles per hour.

Schmidt, Sheppard and Naucukidi agree that the convoy then came upon a taxi.

According to the accounts of Schmidt and Sheppard, Washbourne remarked, "I've never shot anyone with my pistol before." As the Suburban passed on the left, Washbourne pushed open the armored door, leaned out with his handgun and fired "7 or 8 rounds" into the taxi's windshield, both wrote in their statements.

Schmidt wrote: "From my position as we passed I could see the taxi had been hit in the windshield, due to the Spidering of the glass and the pace we were travelling, I could not tell if the driver had been hit, He did pull the car off the road in an erratic manner."

Sheppard said Washbourne was "laughing" as he fired.

Washbourne called their accounts "an absolute, total fabrication." He said the Suburban's high rate of speed and the wind resistance would have made the shooting "physically impossible."

"There's not an ounce of truth in it. It did not happen," Washbourne said angrily. "And as far as the statement goes where I said, 'I've never shot anyone with my pistol,' that is a lie. It was never one time said."

Naucukidi said that Washbourne fired at the taxi with his M-4 and that he ordered Sheppard to cut off the taxi beforehand. Naucukidi said Sheppard followed the order and used the Suburban to slow down the taxi and give Washbourne a better position to shoot from.

"When we were slightly ahead, JW just opened his door and started shooting the taxi from where we were sitting," Naucukidi said in an interview.

Naucukidi described the taxi driver as a 60- to 70-year-old man. He said he saw one hole in the taxi's windshield but could not tell if the driver had been hit. He said the taxi abruptly stopped.

"From my point of view, this old man, he was so innocent, because he was ahead of us with a normal speed," Naucukidi said. "He couldn't have any danger for us."

Sheppard sped away to catch up to the rest of the convoy, according to Naucukidi, who added that the three Americans were laughing and that Schmidt reached over, tapped Washbourne on the shoulder and told him, "Nice shot."

"They felt that it was so funny," Naucukidi said.

Schmidt denied that he complimented Washbourne. "No, I don't get a thrill out of killing innocent people," he said. "That was a moment of shame."

Divergent Reports

When the convoy returned to the Green Zone, members of the team scattered.

Naucukidi said he immediately told his supervisor, Jona Masirewa, who served as a liaison between the Fijian contractors and the Americans, about the incidents. He said Masirewa instructed him to write up a report to use in case an investigation occurred.

Naucukidi wrote the one-page report on his laptop. It contained brief summaries of the two afternoon shootings.

Of the first incident, near the airport checkpoint, Naucukidi wrote that the white truck was approaching slowly and was 200 meters away when Schmidt opened fire: "Happy shot three (3) rounds from his M4 rifle, and the white bongo truck stopped."

In the second incident, Naucukidi wrote, the Suburban "over took one white taxi with an Iraqi single pack," or passenger. He wrote that "our team leader opened his door and fired three rounds at white taxi."

But Naucukidi said Masirewa feared losing his job and did not immediately turn over the report. "It was a difficult thing for us because we are TCNs," or third-country nationals, "and they are expats," Naucukidi said. "They are team leaders, and they make commands and reports on us. And the team leaders were always saying, 'What happens today, stays today,' and if something like that happens, the team leaders, they start covering each other up."

Masirewa, who is still employed by Triple Canopy in Iraq, did not return e-mails seeking comment.

By the time Washbourne went on vacation the following day, Schmidt and Sheppard had not reported the incidents. Schmidt said he was concerned about "catching a bullet in the head." Sheppard said he was so shaken he spent the night at another location inside the Green Zone.

But other employees did not believe that Schmidt and Sheppard feared for their safety. Rather, they said, the two men feared for their high-paying jobs and believed that Thomason, the assistant project manager, would throw his support behind Washbourne, his close friend.

On July 10, two days after the incidents on the airport run, Sheppard finally went to Asa Esslinger, another supervisor, and reported them to Triple Canopy management.

'Just a Rampant Day'

On July 12, back home in Oklahoma, Washbourne received a call on his cellphone from Triple Canopy's country manager, Kelvin Kai, he recalled later.

Washbourne said Kai asked him if he remembered any shooting incidents July 8. Washbourne said he told Kai that he had forgotten to file written reports. He said he rushed to his apartment from a Tulsa pizza restaurant and sent in the reports from his laptop.

Two hours later, Kai called again from Baghdad. "He said that allegations were made that it was just a rampant day, is I believe what he called it, of shooting and mayhem," Washbourne recalled. "I said, 'No, boss, you got those two reports.' "

Kai could not be reached for comment. Triple Canopy declined to make him available, citing the ongoing lawsuit.

The following day, Triple Canopy suspended Schmidt and Sheppard pending an internal investigation. No action was immediately taken against Washbourne because he was home on leave, according to the company.

"It is essential that we have your complete cooperation in reporting the facts and circumstances of all the activities not only to Triple Canopy but also to officials from DoD and KBR if necessary," wrote Tony Nicholson, a Triple Canopy vice president, in letters to Schmidt and Sheppard.

Triple Canopy said it took statements from 30 potential witnesses for its internal probe. One week later, the three guards were informed by Raymond P. Randall, a senior vice president of Triple Canopy, that they had been fired.

"I am personally disappointed that you failed to immediately recognize the seriousness of this breach of operating procedures and its potential impact on the company's reputation," Randall wrote.

The terminations did not preclude the possibility of future investigations by the military, Randall wrote.

Van Arsdale, a retired colonel in the Army's Delta Force and a winner of the Silver Star, said Triple Canopy reported the incidents to KBR and to military officials in the Green Zone.

Triple Canopy officials said that because of the seriousness of the allegations, they expected that the military would conduct a separate investigation to determine whether further action was warranted.

Lt. Col. Michael J. Hartig, the former director of security for the Green Zone, said Triple Canopy officials approached him in his office but did not specify the allegations. "They mentioned they had a couple guys do some things that were questionable on the road, and that was pretty much it," he said.

Hartig said he informed Triple Canopy that such incidents were "out of my venue." He said he referred the company to the Joint Contracting Command for Iraq and Afghanistan, which administers contracts. "I didn't want to get involved in this because I had enough going on in my life," Hartig said. "It was like, 'Here's the point of contact. Have a nice day.' "

Two military spokespeople said they were unaware of any investigations into the shootings. Maj. David W. Small, a spokesman for the United States Central Command, which oversees Iraq, said: "This is not a Centcom issue. It's whoever was running that contract."

"We're fighting a war here," Small said.

Deal to Make Sallie Mae a Big Debtor

new york times
Sallie Mae has long profited from making loans to college students. Now, the company will be saddling itself with debt in an effort to generate even more lucrative returns.

Yesterday, Sallie Mae, as the SLM Corporation is known, agreed to be taken private for $25 billion amid a private equity wave that has swept Wall Street and as calls are heard in Washington to reduce federal subsidies for student loans.

As the largest buyout of a financial services company, the deal has the potential to not only transform Sallie Mae but shake up the entire lending industry.

The buyout will put the company in the hands of two private equity investors, J. C. Flowers and Friedman Fleischer & Lowe, and two banking giants, Bank of America and JPMorgan Chase.

Although the buyers are investing a total of $8.8 billion of their own money, the remaining $16.2 billion will be financed with debt. Together, the two buyout firms will control 50.2 percent of the company, while the banks will provide Sallie Mae with up to $200 million in backup financing and own the remaining stake.

The complex transaction is expected to close late this year, but is bound to face intense scrutiny. The deal comes as debate is renewed on Capitol Hill over how heavily the government should subsidize and guarantee student loans made by Sallie Mae and smaller rivals.

“The student loan business is transforming,” said Charles A. Gabriel Jr., an analyst with the Prudential Equity Group. “This gives the industry’s critics ammunition to say there are outsize profits and excess subsidies.”

Yet shares of Sallie Mae surged nearly 18 percent yesterday. The stock closed up $8.29, to $55.05 — still shy of the $60 a share the four buyers are offering, which is a nearly 50 percent premium over Sallie Mae’s battered share price before news of a potential buyout was reported in The New York Times last week.

“Some of the savviest minds on Wall Street believe that even in the face of a Congressional debate over subsidies, there is room for a 50 percent premium,” Mr. Gabriel said.

Shares of other lenders soared on the belief that that more private equity deals could be coming. Shares of Nelnet, a smaller student loan company, jumped nearly 15 percent, while shares of the Student Loan Corporation rose 5 percent.

The deal for Sallie Mae also appeared to prompt investors to reconsider whether other financial companies — once thought too big and too debt-averse for private equity — could become targets. Shares of CIT rose 5 percent and shares of Countrywide Financial were up 7 percent.

For Sallie Mae, whose $142 billion portfolio makes it the nation’s largest provider of student loans, the deal represents a chance to escape the public limelight at a time when its business model is under attack.

Democratic lawmakers and President Bush are threatening to cut the federal subsidies that guarantee lenders a certain level of profit and help insure them against default. Regulatory investigations and media scrutiny of suspected deceptive sales practices are casting a harsh light on Sallie Mae’s fastest-growing and most lucrative business: high-interest private loans to bridge the gap between tuition costs and federal aid.

Some analysts say that the deal represents a bet by private investors that Sallie Mae can survive, and even thrive, in spite of the intense legislative pressure.

If Congress were to take away part of the lender subsidies, Sallie Mae’s low operating costs would still give it an advantage over smaller rivals. That could help expand its 36 percent share of the $197 billion in outstanding federally guaranteed loans, according to Citigroup analysts.

Sallie Mae could also become a bigger player in the origination of private loans, a lucrative market ranging from $17 billion to $25 billion, where it already has as much as a 40 percent share. That business does not depend on the government and is currently fueling the company’s growth.

“The underlying business is very strong from a growth perspective since education costs are growing at twice the rate of inflation,” said Richard Hoffmann, a financial analyst for CreditSights in New York. “You can simply look at the enrollment of high school students and see what the growth rate is.”

It is also a chance for Sallie Mae executives to cash out. Albert L. Lord, Sallie Mae’s chairman, took home pay worth more than $228 million before stepping down in 2005, according to an Equilar analysis. Its current chief executive, Thomas J. Fitzpatrick, has accumulated nearly $180 million in total compensation. On top of that, the deal could prompt a change-of-control payout, accelerating more than $31.6 million in stock and options. Mr. Fitzpatrick and the rest of the Sallie Mae management team are expected stay on as part of the deal.

Of course, the deal also poses the same risks that have prevented other financial firms from being taken over by private equity investors.

Piling on billions of dollars in debt at a company like Sallie Mae is a tricky endeavor, especially when interest margins are tight. But Sallie Mae appears ready to walk away from issuing high-grade bonds and into the edge of junk-bond territory.

Yesterday, all three major credit rating agencies — Fitch, Moody’s, and Standard & Poor’s — either lowered Sallie Mae’s ratings or put the company on watch.

Analysts say that Sallie Mae will try to offset that risk in two ways. First, it can rely on the steady stream of cash that is thrown off by the guaranteed federal student loans in its portfolio. And in the event that its access to capital becomes limited, Bank of America and JPMorgan Chase have arranged to provide as much as $200 million in backup financing to guarantee that the company can make low-cost loans.

While all four investors are lured by the lucrative returns, Bank of America and JPMorgan may expect additional strategic benefits. For one, it also gives them access to college students, with whom they seek lifelong relationships. Moreover, they can expect to make income and fees from the deal. And analysts say teaming up with a buyout firm allows the banks to expand their student loan business without making a deal that could reduce earnings.

The banks’ close relationship with Sallie Mae could now give them a cost advantage. Both big banks have existing student- lending businesses, which they insist will remain independent. But Sallie Mae said the agreement allows the two banks to let it package their private loans, their faster-growing and more profitable business, at potentially lower rates.

Several analysts expect Bank of America and JPMorgan to begin moving away from existing loan packagers, like First Marblehead, and to Sallie Mae. Even though both banks are locked into their contracts until they expire, First Marblehead shares lost more than a fifth of their value yesterday.

On Capitol Hill, some lawmakers used the Sallie Mae buyout to criticize the use of government funds to support private student lenders.

Senator Edward M. Kennedy, the Massachusetts Democrat who is chairman of the education committee, said it was “more urgent than ever to enact reforms to our student loan system to ensure that students, not profits, are our top priority.”

Eritrea: Somali crisis entangles Ethiopia-Eritrea border dispute

(SomaliNet) Analysts say tensions between Ethiopia and Eritrea could further worsen due to the Somali crisis in the countdown to a November deadline, set by an independent boundary commission, for both sides to demarcate their border.

Ethiopia and Eritrea’s involvement in Somalia has added a dangerous new element to their already tense relationship and faded hopes they may resolve a border dispute seen as vital for regional stability.

"The tragedy is that it’s gone well beyond the confines of the border dispute," said Patrick Smith, editor of the Africa Confidential newsletter."It’s now to a point where there can be no amelioration on the border issue until there is some resolution in Somalia," he said by telephone from England.

The neighbours have been locked in a bitter impasse over the border since the Hague-based commission issued its ruling on the 1,000 km (620 mile) frontier in April 2002, as part of a peace deal ending Ethiopia and Eritrea’s 1998-2000 war.

The border ruling awarded a flashpoint town of Badme to Eritrea in a decision rejected by Ethiopia.Diplomats accuse both sides of playing out their feud by supporting opposing parties in Somalia, saying the proxy conflict exacerbates the border row now in its fifth year.

Somalia and Ethiopia have accused Eritrea of undermining the interim Somali government by supplying weapons to insurgents involved in some of the worst fighting in Mogadishu for more than 15 years.

Asmara vehemently denies allegations it is funnelling arms to anti-government forces in Somalia and accuses Ethiopia of breaking international law by "invading" Somalia and interfering with the country’s right to chose its own leaders.-(Sudan Tribune)

Pentagon: Zubaydah denies al-Qaida link

chron
WASHINGTON — Abu Zubaydah, accused of being a senior al-Qaida operative, says he has been a U.S enemy since childhood but isn't a member of the terrorist group or an associate of Osama bin Laden.

Zubaydah also told a military hearing in Guantanamo Bay, Cuba, that he had been tortured in U.S. custody and confessed to things he did not do, according to a Pentagon transcript released Monday.

Zubaydah said that from 1994 to about 2000 he was a facilitator at guest houses in Pakistan, where he helped Muslims get to Afghanistan's Khalden training camp for "defensive jihad" — that is to fight against forces that invade Muslim lands anywhere. He then helped send the trained militants on to Bosnia, Chechnya and elsewhere, he said.

"The statement that I was an associate of Osama bin Laden is false," Zubaydah is quoted as saying by the transcript of his March 27 hearing. "I'm not his partner and I'm not a member of al-Qaida."

"Bin Laden wanted al-Qaida to have control of Khalden, but we refused since we had different ideas," Zubaydah said.

He said he's happy to see others attack U.S. military targets such as the USS Cole — bombed by terrorists in 2000 as it refueled off Yemen — but believes it's against Islam to kill civilians.

"I disagreed with the al-Qaida philosophy of targeting innocent civilians like those in the World Trade Center," he said, referring to the Sept. 11, 2001 attack on New York.

The Defense Department's redacted 27-page transcript included a statement read to the hearing by Zubaydah's appointed representative in addition to lengthy passages that were hard to understand because Zubaydah spoke in English, acknowledging at one point "I don't know grammar in English."

He said others involved with jihadist training in Afghanistan were angry with bin Laden after al-Qaida's Sept. 11 attacks because they had no advance warning, but that it was not a good time for disagreements among the groups.

"After eleven September, the big groups, they was angry from bin Laden — why you not tell us about this big operation? At least give us a chance to adjust ourself," Zubaydah said.

"But we have idea ... that if the enemy came to attack us, it is not good to make different between us."

The purpose of the Guantanamo hearings is to determine whether the detainees should be classified as "enemy combatants" eligible for a military trial for war crimes.

Authorities allege Zubaydah qualifies because of evidence he ran the Khalden training camp, where so called "millennium bomber" Ahmed Ressam studied for the mission to bomb New Year's 2000 celebrations in the United States. He is an expert in document forgery and trained in explosives at the Khalden camp, U.S. intelligence officials have said.

Zubaydah also transported $600,000 to bin Laden in Saudi Arabia in 1996, according to other evidence. Zubaydah denied it.

Between 1994 and 2000, he often smuggled persons and chemicals — such as cyanide and nitrates for use in al-Qaida weaapons — from Pakistan int Afghanistan, officials allege.

Quoting form his diary, authorities also say he has stated he was preparing for attacks on America after Sept. 11, that he would wage war against the U.S., instigate racial war and attack gas stations.

"I never conducted nor financially supported nor helped in any operation against America," Zubaydah said, asserting that although he is a U.S. enemy, he is not an enemy combatant.

"I have been an enemy of yours since I was a child because of your unjust acts against my people, the Palestinians through your help and partnership with Israel in occupying our land," the transcript said.

"All I hope from you is that you try me for something that I am proud of having done, not something I didn't do or am against," it said.

"The statement that I was an associate of Osama bin Laden is false," the transcript quotes Zubaydah as saying. "I'm not his partner and I'm not a member of al-Qaida.

"Bin Laden wanted al-Qaida to have control of Khalden, but we refused since we had different ideas," Zubaydah said.

Zubaydah appeared before a Combatant Status Review Tribunal, an administrative hearing, at Guantanamo Bay on March 27, as one of 14 "high value" detainees transferred there last September after being held at secret CIA prisons abroad. The public and reporters are not permitted access to the hearings; of the 13 held so far, 12 transcripts have been released.

Zubaydah said he was not tortured after his transfer to Guantanamo, but before.

The Pentagon has said it is investigating allegations of torture. The CIA says the United States doesn't conduct or condone torture.

Not long after the March 2002 capture of Zubaydah, the CIA's interrogation practices became more formal. The CIA decided it would need to hold high-value terrorists such as Zubaydah for extended periods in an effort to extract information. They also began using some so-called enhanced interrogation techniques with success.

Answers elusive after massacre

“This is a rural area. … You usually think of these things happening in downtown Baltimore or Washington.” Why Gunman Murdered 32 Is Unknown Virginia Tech shooting spree is deadliest in U.S. history
buffalo news
BLACKSBURG, Va. — A shaken nation was seeking answers today after a gunman massacred 32 people at Virginia Polytechnic Institute and State University in the deadliest shooting rampage in modern U.S. history.

The gunman cut down his victims in two attacks two hours apart Monday morning before the university could grasp what was happening and warn students.

The bloodbath ended with the gunman committing suicide, stamping the campus in the picturesque Blue Ridge Mountains with unspeakable tragedy.

Investigators gave no motive for the attack. The gunman’s name was not immediately released, and it was not known whether he was a student.

“Today the university was struck with a tragedy that we consider of monumental proportions,” Virginia Tech President Charles W. Steger said. “The university is shocked and indeed horrified.”

But he was also faced with difficult questions about the university’s handling of the emergency and whether it did enough to warn students and protect them after the first burst of gunfire at a dormitory. Some students bitterly complained that they got no warning from the university until an e-mail that arrived more than two hours after the first shots rang out.

Wielding two handguns and carrying multiple clips of ammunition, the killer opened fire at about 7:15 a.m. on the fourth floor of West Ambler Johnston, a high-rise coed dormitory, then stormed Norris Hall, a classroom building a half-mile away on the other side of the 2,600-acre campus. Some of the doors at Norris Hall were found chained from the inside, apparently by the gunman.

Two people died in a dorm room, and 31 others were killed in Norris Hall, including the gunman, who put a bullet in his head. At least 15 people were hurt, some seriously.

During an evening news conference, Police Chief Wendell Flinchum refused to dismiss the possibility that a co-conspirator or second

shooter was involved. He said police had interviewed a “person of interest” in the dorm shooting who knew one of the victims, but he declined to give details.

“I’m not saying there is someone out there, and I’m not saying there is someone who is not,” Flinchum said. Ballistics tests would help explain what happened, he said.

Sheree Mixell, a spokeswoman for the federal Bureau of Alcohol, Tobacco, Firearms and Explosives, said the evidence was being moved to the agency’s national lab in Annandale. At least one firearm was turned over, she said.

During the ordeal, students jumped from windows in panic. Young people and faculty members carried out some of the wounded, without waiting for ambulances to arrive. Many found themselves trapped behind chained and padlocked doors.

Alec Calhoun, a junior from Waynesboro, said he was among those who jumped. He was in a second-floor engineering class when shooting erupted next door. The gunman came to his classroom, he said, but by then students had begun leaping from windows.

“Two people behind me were shot,” he said, adding that he was not seriously injured.

Trey Perkins, who was sitting in a German class in Norris Hall, told the Washington Post that the gunman barged into the room at about 9:50 a.m. and opened fire for about a minute and a half, squeezing off 30 shots.

The gunman, Perkins said, first shot the professor in the head and then fired on the students. Perkins said the gunman was about 19 years old and had a “very serious but very calm look on his face.”

“Everyone hit the floor at that moment,” said Perkins, 20, of Yorktown, a sophomore studying mechanical engineering. “And the shots seemed like it lasted forever.”

Erin Sheehan, who was also in the German class, told the student newspaper, the Collegiate Times, she was one of only four out of about two dozen people in the class to walk out of the room. The rest were dead or wounded, she said.

She said the gunman “was just a normal-looking kid, Asian, but he had on a Boy Scout-type outfit. He wore a tan button-up vest, and this black vest, maybe it was for ammo or something.”

Students said there were no public address announcements after the first shooting at the dorm. Many said they learned of it in an e-mail that arrived shortly before the gunman struck again.

“I think the university has blood on their hands because of their lack of action after the first incident,” said Billy Bason, 18, who lives on the seventh floor of the dorm.

“This is a rural area, a college town,” student Austin Eckerd, 21, said in an interview. “You usually think of these things happening in downtown Baltimore or in Washington.”

Steger defended the university’s conduct, saying authorities believed that the shooting at the dorm was a domestic dispute and mistakenly thought the gunman had fled the campus.

“We had no reason to suspect any other incident was going to occur,” he said.

Until Monday, the deadliest shooting in modern U.S. history was in Killeen, Texas, in 1991, when George Hennard plowed his pickup truck into a Luby’s Cafeteria and shot 23 people to death, then himself.

The massacre Monday took place almost eight years to the day after the Columbine High bloodbath near Littleton, Colo. On April 20, 1999, two teenagers killed 12 fellow students and a teacher before taking their own lives.