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Leyla Basagoitia, who was fired from Stanford Group Company in 2002, told a broker-dealer arbitration panel that the firm was engaged in a Ponzi scheme, according to a document on the website of broker-dealer watchdog Financial Industry Regulatory Authority (FINRA).

In 2003, Basagoitia and the Stanford Group Company were trying to resolve a loan dispute through an arbitration forum run by a FINRA predecessor.

At the time, Basagoitia told the arbitration panel that before accepting her position at Stanford Group she emphasized that it was not her intent to allocate any of her clients’ funds to Stanford Group’s offshore bank, Stanford International Bank — one of the companies named in the government’s civil complaint.

Declines were led by 10- and 30-year securities. President Barack Obama’s administration forecast a budget deficit of $1.75 trillion in the fiscal year ending Sept. 30. That’s 23 percent higher than a forecast by economists at primary dealer Goldman Sachs Group Inc., and equivalent to about 12 percent of the nation’s gross domestic product.

“This mountain of supply isn’t going to go away any time soon,” said Kevin Flanagan, a Purchase, New York-based fixed- income strategist for Morgan Stanley’s individual-investor clients. “If Obama or Congress cannot offset some of the spending with tax increases, or in cutting back on other spending, then the difference has to be made up with Treasury issuance.”

…

“The biggest difficulties will be in the next few seven- year auctions,” said William O’Donnell, a U.S. government bond strategist at UBS Securities LLC in Stamford, Connecticut, one of the 16 primary dealers required to bid at Treasury auctions. “We’re going to get a very hefty slug of supply. As the saying goes, if you miss an auction this week, you’ll get another auction next week. It never ends.”

Possibility of Default

The U.S. is borrowing so much that it may have trouble paying the money back, said Jaemin Cheong, a bond trader in Seoul at Industrial Bank of Korea, the nation’s largest lender to small- and mid-sized companies.

The global economic meltdown has already caused bank failures, bankruptcies, plant closings and foreclosures and will, in the coming year, leave many tens of millions unemployed across the planet. But another perilous consequence of the crash of 2008 has only recently made its appearance: increased civil unrest and ethnic strife. Someday, perhaps, war may follow.

As people lose confidence in the ability of markets and governments to solve the global crisis, they are likely to erupt into violent protests or to assault others they deem responsible for their plight, including government officials, plant managers, landlords, immigrants and ethnic minorities. (The list could, in the future, prove long and unnerving.) If the present economic disaster turns into what President Obama has referred to as a “lost decade,” the result could be a global landscape filled with economically fueled upheavals.

Indeed, if you want to be grimly impressed, hang a world map on your wall and start inserting red pins where violent episodes have already occurred. Athens (Greece), Longnan (China), Port-au-Prince (Haiti), Riga (Latvia), Santa Cruz (Bolivia), Sofia (Bulgaria), Vilnius (Lithuania) and Vladivostok (Russia) would be a start. Many other cities from Reykjavik, Paris, Rome and Zaragoza to Moscow and Dublin have witnessed huge protests over rising unemployment and falling wages that remained orderly thanks in part to the presence of vast numbers of riot police. If you inserted orange pins at these locations — none as yet in the United States — your map would already look aflame with activity. And if you’re a gambling man or woman, it’s a safe bet that this map will soon be far better populated with red and orange pins.

For the most part, such upheavals, even when violent, are likely to remain localized in nature, and disorganized enough that government forces will be able to bring them under control within days or weeks, even if — as with Athens for six days last December — urban paralysis sets in due to rioting, tear gas and police cordons. That, at least, has been the case so far. It is entirely possible, however, that, as the economic crisis worsens, some of these incidents will metastasize into far more intense and long-lasting events: armed rebellions, military takeovers, civil conflicts, even economically fueled wars between states.

The army said on Thursday the new deployment could take the number of soldiers and federal police to over 7,000 in Ciudad Juarez, across the border from El Paso, Texas. This month drug hitmen killed 250 people in Juarez, where a meeting of cabinet members on Wednesday was rattled by bomb scares.

“In yesterday’s meeting (government officials) talked about sending 5,000 troops and police to Ciudad Juarez,” said army spokesman Enrique Torres. “They are expected to arrive in the next few weeks.”

At the heavily guarded meeting on Wednesday, Interior Minister Fernando Gomez Mont said the troop reinforcements would be “notable” but declined to give more details.

Torres said there were 2,020 troops and 425 federal police in Ciudad Juarez, a city of around 1.6 million people.

Drug trade analysts say those soldiers risk being overwhelmed by vicious drug gangs fighting over smuggling routes in league with corrupt city and state police.

President Felipe Calderon has sent out some 45,000 troops across Mexico to try and crush drug gangs but clashes between rival cartels and security forces killed around 6,000 people last year. The United States is concerned the violence could spill over the border, escalating the conflict.

Mexico’s most-wanted fugitive, Joaquin “Shorty” Guzman, who leads a cartel from the Pacific state of Sinaloa, wants control of Ciudad Juarez, currently in the hands of local drug lord Vicente Carrillo Fuentes, to traffic drugs into Texas.

That information was contained in a series [1] of court [2] filings [3] released in advance of the long-awaited sentencing of Kyle Dustin “Dusty” Foggo, the disgraced former No. 3 official at the CIA.

One remarkable affidavit came from a leader of SAD, a branch of the CIA’s National Clandestine Service, which handles covert actions. It indicates that Foggo forced SAD to use a shell company set up by defense contractor Brent R. Wilkes to handle its sensitive air operations, even though Wilkes and his company had no experience in clandestine aviation operations.

Wilkes was Foggo’s boyhood friend and a co-conspirator in the bribery scandal that erupted around former Rep. Randy “Duke” Cunningham, who is serving more than eight years in federal prison.

Since the 9/11 terror strikes, SAD’s role in the war on terror has become more prominent. Its paramilitary operatives have been used to snatch high-value suspects from the streets of foreign countries for rendition to black sites for interrogation. When carrying out their operations in other countries, the agents typically do not wear uniforms or carry items that connect them to the U.S. government. If they are caught, the government may disavow any connection to them.

Foggo’s sentencing, scheduled Thursday before Judge James C. Cacheris in U.S. District Court in Alexandria, Va., will be the final sentencing of the ring of co-defendants in the bribery scandal that erupted around Cunningham.

Foggo, 53, was running the CIA on a day-to-day basis until he resigned in 2006 after his name surfaced in the scandal. At first, Foggo sought to have the charges against him dismissed. When that failed, he argued that he would need to disclose classified information to defend himself. This practice, sometimes referred to as graymail, was rejected by the court, but led prosecutors to drop 27 of the 28 charges against him.

In September, Foggo pleaded guilty to a single count of defrauding the government of his “honest services” by steering contracts to Wilkes. While Cacheris could sentence Foggo to up to 20 years in prison, the plea agreement calls for 37 months behind bars. Foggo is seeking an even more lenient sentence from the judge.

In the days leading up to the sentencing, prosecutors have sought the release of transcripts from grand jury proceedings that they believe will be helpful in opposing a reduced sentence. The flurry of motions and counter-motions resulted in the release of a trove of documents Monday, including the affidavit from one of SAD’s leaders.

In the affidavit [3], in which he is identified as “John Doe # 1,” the official says Foggo introduced Wilkes to him and other SAD officials as “someone who had an extensive corporate portfolio that included experience in aviation, and for that reason could assist SAD. Mr. Foggo then left Wilkes with us to discuss our need for cover for our air operations.”

Within days, Wilkes provided the group with a $132 million proposal that John Doe # 1 described as “unwieldy, cumbersome, and lacking a real understanding of what the Agency needed…If implemented as presented, I believed the proposals would be wasteful, misguided, and contrived.”

Nonetheless, Foggo ordered them to proceed quickly. “The rapid decision by Mr. Foggo and the urgent deadlines he imposed on the program meant that we necessarily had to use Mr. Wilkes for the Enhanced Capability, because he was the only option available to us at the time,” the official testified. Despite misgivings about the directive coming from Foggo, “we saluted and carried out his orders.”

The plan was derailed in August 2005 after Wilkes’ and Foggo’s roles in the Cunningham scandal surfaced, but not before it had cost the government $40 million in planning expenses, according to the documents.

“Upon being apprised of this, I was greatly relieved that we would not have to proceed with the cover solution with Wilkes, and would have more time to explore the best possible solution,” John Doe #1 wrote.

The documents also argue that Wilkes and Foggo tried to incorporate the military’s need for armored vehicles into an array of contracts that involved not only the CIA’s sensitive air operations but also water for troops in Iraq. Wilkes’ and Foggo’s deals — during which they hid their long, personal friendship from other government officials — included markups of up to 60 percent on the goods and services they sold the CIA.

The documents released Monday provide extensive details about Foggo’s efforts to move his mistress from Europe to Langley when he was promoted in November 2004 from chief of support at an undisclosed European location to the agency’s No. 3 post, executive director.

According to prosecutors and testimony included in the filing, Foggo arranged for his family to remain in Europe at taxpayer expense while he moved to Langley. He then arranged a CIA job for his mistress, identified only by the initials ER. At first the CIA ruled that ER was ineligible for employment because a background check found that she had an improper relationship with a superior in her previous government position and had destroyed evidence being sought by the inspector general of that agency.

Foggo summoned the agency’s managing associate general counsel to his office and insisted that the woman’s service was vital and she must be hired, without disclosing his romantic relationship with ER, according to the documents. ER was hired, but her supervisor soon found her work unsatisfactory.

“Instead of being receptive to her supervisor’s critiques and suggestions, ER made it clear that she had influence with Foggo. Indeed, she did,” the prosecutors’ sentencing memo [2] states. “Her supervisor had been an attorney with the (CIA’s Office of General Counsel) for 20 years, during which time she received numerous performance awards and even the Career Intelligence Medal, which rewards ‘exceptional achievements that substantially contributed to the mission of the Agency’ over the course of her career. Within months of crossing Foggo’s mistress, however, she suffered a humiliating firing by Foggo.”

The government’s 24-page reply [1] to Foggo’s sentencing memorandum, 31-page sentencing memo [2] and 82-page appendix [3] are full of such previously undisclosed material.

The Labor Department said Thursday that first-time requests for unemployment benefits jumped to 667,000 from the previous week’s figure of 631,000. Analysts had expected a slight drop in claims.

The 667,000 new claims are the most since October 1982, though the labor force has grown by about half since then. The four-week average of initial claims, which smooths out fluctuations, rose to 639,000, the highest in more than 26 years.

Separately, U.S. manufacturers saw orders for big-ticket goods plunge by a larger-than-expected 5.2 percent in January as global economic troubles cut demand from customers at home and abroad.

The latest report on U.S. factory activity, released by the Commerce Department, showed orders falling for a record sixth straight month. The previous record of four months came in 1992.

Meanwhile, the number of people receiving unemployment insurance for more than one week also increased more than expected to 5.1 million. That’s the fifth straight week the figure has set a new record-high on data going back to 1967, and compared with only about 2.8 million people a year ago.

As a proportion of the work force, the number of people continuing to receive benefits has reached its highest point since July 1983.

An eye-popping $1.75 trillion deficit for the 2009 fiscal year is projected in Obama’s first budget, according to U.S. officials who briefed reporters on the numbers.

That is equal to 12.3 percent of U.S. gross domestic product — the largest share since 1945 when the country ran a shortfall of 21.5 percent of GDP.