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Halliburton, once headed by former Vice President Dick Cheney, said it was awaiting final approval from the U.S. Department of Justice and the Securities and Exchange Commission to settle claims that KBR violated anti-bribery laws by paying kickbacks to Nigerian officials.

Under the settlement, Halliburton would pay $382 million to the Department of Justice and $177 million to the Securities and Exchange Commission in “disgorgement.”

KBR did not comment on the proposed settlement. Halliburton said in regulatory filings last July that it was in settlement talks with the government.

Dan Newcomb, a partner at law firm Shearman and Sterling in New York who specializes in Foreign Corrupt Practices Act (FCPA) law, said it was likely more companies involved in anti-corruption cases would settle with the U.S. government.

Under the FCPA, it is illegal for U.S. companies or their agents to use bribes to win foreign business.

Marvin E. Schur died “a slow, painful death,” said Kanu Virani, Oakland County’s deputy chief medical examiner, who performed the autopsy.

Neighbors discovered Schur’s body on Jan. 17. They said the indoor temperature was below 32 degrees at the time, The Bay City Times reported Monday.
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“Hypothermia shuts the whole system down, slowly,” Virani said. “It’s not easy to die from hypothermia without first realizing your fingers and toes feel like they’re burning.”

‘Limiter’ device installed
Schur owed Bay City Electric Light & Power more than $1,000 in unpaid electric bills, Bay City Manager Robert Belleman told The Associated Press on Monday.

A city utility worker had installed a “limiter” device to restrict the use of electricity at Schur’s home on Jan. 13, said Belleman. The device limits power reaching a home and blows out like a fuse if consumption rises past a set level. Power is not restored until the device is reset.

The limiter was tripped sometime between the time of installation and the discovery of Schur’s body, Belleman said. He didn’t know if anyone had made personal contact with Schur to explain how the device works.

The body was discovered by neighbor George Pauwels Jr.

“His furnace was not running, the insides of his windows were full of ice the morning we found him,” Pauwels told the Bay City News.

Power shut off if bills unpaid
Belleman said city workers keep the limiter on houses for 10 days, then shut off power entirely if the homeowner hasn’t paid utility bills or arranged to do so.

He said Bay City Electric Light & Power’s policies will be reviewed, but he didn’t believe the city did anything wrong.

“I’ve said this before and some of my colleagues have said this: Neighbors need to keep an eye on neighbors,” Belleman said. “When they think there’s something wrong, they should contact the appropriate agency or city department.”

Schur had no children and his wife had died several years ago.

Bankers’ worst nightmare is the unemployment rate climbing toward 10%, a level at which credit losses could balloon unpredictably because of high defaults among people with previously strong credit histories.

Right now, bank balance sheets don’t appear in a position to deal with unemployment moving sharply higher from its current 7.2% rate.

Building up bad-loan reserves to deal with a 9% to 10% rate could produce enormous losses and pulverize capital when banks are trying to preserve the thin cushions they have. And fear of rising unemployment could deter lending when the government wants banks to expand credit. True, the Obama administration’s stimulus plan could reduce unemployment expectations. But right now, banks are hoisting their joblessness forecasts.

Last week, consumer lender Capital One Financial increased its unemployment forecast to 8.7% by the end of 2009, from its previous expectation of 7% by midyear. And Capital One added that it is building more-severe unemployment scenarios into lending decisions.

Also last week, Kelly King, chief executive of regional bank BB&T, said unemployment of 8% to 8.5% is “kind of manageable,” but 9% to 10% would “have a dramatic impact on our scenarios.”

Why the trepidation of going above 9%? Take a regular credit-card book. Past data show that a percentage-point increase in unemployment leads to roughly a percentage-point rise in the charge-off rate, the amount of defaulted loans written off at a loss.

But as unemployment exceeds 9%, bankers think charge-offs will start to increase by more than the increase in unemployment. The reason? A high rate could cause an unprecedented wave of defaults among prime borrowers, who tend to have bigger loan balances.

As unemployment gets worse, investors shouldn’t rely on some bank executives to paint a clear picture about credit losses.

“The situation is so extreme and beyond what we’ve seen in past cycles that management teams are becoming reluctant to predict the relationship between unemployment and credit losses,” said Kevin Fitzsimmons, analyst at Sandler O’Neill & Partners.

Investors can stay one step ahead by identifying banks that are exposed to regions and products that unemployment could hit hardest. Particular caution should be shown toward banks focused on California, where unemployment already is 8.4% and rose to 11% in the early-1980s’ recession. Investors should quiz Golden State-based Wells Fargo about the relationship between job losses and credit when it reports earnings Wednesday.

The credit boom created an explosion of new-fangled, high-balance loans to prime borrowers that could get hit badly as unemployment rises. Last week, Capital One mentioned that its closed-end loans were going bad quickly, even though they were made to what the bank calls “superprime” borrowers.

Already this year, seven companies in the Standard & Poor’s 500 index have decreased their dividends, removing some $12 billion from shareholders’ pockets in the coming months. On Monday, Pfizer became the latest blue-chip company to do so.

These cuts serve up another hit to shareholders who have already been battered by the steep declines in the stock market. That is especially true of retirees, who tend to be attracted to so-called “widows and orphans” stocks that provide them with a steady cash flow.

If the trend continues, this will be the worst year for dividend cuts since 1958, when annual payments fell by 8.4 percent, according to new research from S&P.

“It is easy to say this is going to be the worst in 50 years, but the bigger question is whether it is going to be much worse than that,” said Howard Silverblatt, senior index analyst at S&P.

That’s not to say that companies shouldn’t cut their dividends if they can’t afford to pay them. The financial industry, for example, has been most active in slashing payouts because it had to — companies need to cut costs and those that have gotten federal aid also have faced pressure from the U.S. government to reduce their dividends.

The company said that it also planned to closely examine all of its costs and spending.

“We have initiated actions which will remove about 20,000 workers from our business and every indirect spend dollar will be heavily scrutinized,” Caterpillar said in a statement. The company had about 113,000 workers at the end of 2008.

“These are very uncertain times, and it’s imperative that we focus Team Caterpillar on dramatically reducing production schedules and costs in light of poor economic conditions throughout the world,” the chief executive, James W. Owens, said in a statement.

“We expect to have most of the actions needed to lower employment and cost levels in place by the end of the first quarter,” Mr. Owens said.

Future indexes on Wall Street, which had been trading higher, fell on the news, and the major exchanges are now expected to open slightly lower.

The announcement of the job cuts came as Caterpillar reported fourth-quarter sales and revenue of $12.9 billion, 6 percent higher than the fourth quarter of 2007. Earnings in the quarter dropped 32 percent, $1.08 a share or $661 million from $1.50 and $975 million. Analyst had expected $1.31 a share on revenue of $12.84 billion.

It also reported sales and revenue of $51.3 billion for the year, a 14 percent in crease from 2007.

More than 40 heads of state and government — almost double the number last year — will be joined by 36 finance ministers and central bankers, including the central bank chiefs of all the G8 group of rich countries except the United States.

About 1,400 business executives will also be in Davos but fewer top bankers and captains of industry are expected as they struggle to keep their businesses afloat — and themselves in a job, mindful of the event’s glitzy image in more austere times.

“The pendulum is swinging back to governments now we’re grappling with recession,” said Thomas Mayer, Deutsche Bank economist. “We’re going into a period where more government involvement will mean lower growth and higher inflation.”

Russian Prime Minister Vladimir Putin will open the four-day meeting on Wednesday in the Swiss Alpine resort that is being organized under the title “Shaping the Post-Crisis world.”

…

Klaus Schwab, the forum’s founder and chairman, said the meeting would be a chance for leaders to think about the kind of world they wanted to see emerge when the crisis is over.

“Real economic activity fell off a cliff during the fourth quarter, producing a sharp drop in employment, output and spending,” wrote economists at Wachovia.

And the worst part is that it’s not over. Economists expect another huge decline in the first quarter, with a smaller contraction in the second quarter.

GDP is expected to have fallen at a 5.5% annualized rate in the final three months of last year, according to the median forecast of economists surveyed by MarketWatch. That would be the biggest decline since the 6.4% drop in early 1982 and one of the worst quarters in the post-World War II era.

The government will release its first estimate of fourth-quarter GDP on Friday, the culmination of a very busy week on the economic calendar. See Economic Calendar.
Other major releases will include durable-goods orders for December, home sales for December, and consumer confidence surveys for January.

In addition, economists will be watching the weekly jobless claims data for more clues about the health of the labor market. We could see first-time claims breach the 600,000 mark for the first time since the early 1980s.

Families must brace themselves for a slump of far greater severity and longevity than the recessions of the 1980s and 1990s, they warned. They said the current crisis will be of a scale to rival the biggest peace-time crisis in modern history — the Great Depression.

The warning was delivered by economists and politicians after the Office for National Statistics revealed that the economy shrank by 1.5 per cent in the final three months of 2008 alone.

The contraction follows a 0.6 per cent fall in gross domestic product (GDP) — the most comprehensive measure of Britain’s wealth generation — during the previous three months. This means Britain fulfils the criteria for a technical recession — two successive quarters of negative output.

The news sent the pound sliding to its lowest level since 1985. Sterling dropped more than three quarters of a cent to $1.3688 as investors speculated that the Bank of England may be forced to cut interest rates towards zero in response to the recession.

John McFall, the Labour chairman of the Treasury select committee, sounded a more optimistic note. He said: “We know that 2009 is going to be really tough for many people. There is a determination in Britain and across Europe to keep people in work, to avoid unemployment, so people’s contribution will not be lost.”

Confirmation that the economy has entered recession capped a week in which Gordon Brown was forced to announce a new £350?billion bank rescue plan. Unemployment has almost reached two million. President Barack Obama discussed the financial crisis with the Prime Minister on the telephone yesterday, his first call to a European leader.

The fall in GDP is the sharpest since 1980, when Britain was mired in its most severe post-war recession. The news is an embarrassment for Mr Brown, who pledged as Chancellor not to return Britain to “boom and bust”.

Britain is likely to suffer more than other economies due to its heavy reliance on the financial services sector, which has all but imploded in the wake of the economic crisis, experts said.

Others raised the spectre of an outright economic depression, often defined by experts as a peak-to-trough economic contraction of 10 per cent. Aside from the demobilisation periods following the First and Second World Wars, this kind of contraction has never taken place — not even in the 1930s’ Great Depression.

Roger Bootle, the managing director of Capital Economics, said: “I think there’s a very good chance this recession will be the worst since the 1930s. I suspect the economy could shrink by 6 per cent from last year to the end of next year — and that might not be the end.

The plight facing Britain is uncannily similar to the 1930s, since prices of many assets —from shares to house prices — are falling at record rates, but the value of the debt against which they are held remains unchanged.

This “debt deflation” is among the most painful of all economic phenomena, since it means the amount families owe increases each year even if they borrow no more.

Albert Edwards, a strategist at Société Générale, likened the British economy to a Ponzi scheme — a fraudulent debt mountain like that allegedly used by the New York hedge fund manager Bernard Madoff.

That leaves what in state government circles are called “payment deferrals” and what in real life is called “stiffing your creditors.”

In this case the creditors include income taxpayers expecting refunds, college students waiting on state aid, counties that operate public assistance programs, and companies that sell goods and services to state agencies.

Chiang has said he won’t write $3.7 billion worth of checks for those and other state programs if legislators and the governor haven’t reached a deal by next Sunday to close the budget gap.

The controller said he must conserve what little cash the state has to be able to make constitutionally required payments to schools and interest payments to state bondholders.

“This is a very painful decision,” Chiang said. “It pains me to pull this trigger, but it is an action that is critically necessary.”

The state’s cash situation is somewhat analogous to your family emptying its checking account, drawing down the savings account to cover checks, and only having enough left to pay either the mortgage or the utility bill.

Of course you could then file for bankruptcy protection. Under federal law, the state can’t do that, but it can do something you can’t: Issue IOUs.

Known formally as “registered warrants,” the state’s IOUs are just that. Someone – a vendor, a landlord, the water company – who is owed money by a California government agency gets a piece of paper that says the state owes them money, and will pay them the amount plus interest at some point in the future.

The only time since the Great Depression that the state has issued IOUs was in 1992, and it wasn’t a pretty sight. About 1.6 million of them, worth a total of $3.8 billion, were issued during a two-month budget tiff between then-Gov. Pete Wilson and legislators.

Instead of paychecks, about 100,000 state workers got IOUs, which proved somewhat harder to cash. After the first month, many of the state’s major banks quit accepting the warrants, saying the 5 percent interest they were paid wasn’t worth the arduous processing needed to redeem them.

And after state employees sued, a federal judge ruled that paying workers with IOUs violated federal labor law. The state agreed in 1996 to give the affected workers extra paid vacation to compensate.

Buried in a Department of Justice report released Tuesday are new allegations about a 2002 arrangement between the United States and China, which allowed Chinese intelligence to visit Guantanamo and interrogate Chinese Uighurs held there.

According to the report by Justice Department Inspector General Glenn Fine, an FBI agent reported a detainee belonging to China’s ethnic Uighur minority and a Uighur translator told him Uighur detainees were kept awake for long periods, deprived of food and forced to endure cold for hours on end, just prior to questioning by Chinese interrogators.

Susan Manning, a lawyer who represents several Uighurs still held at Guantanamo, said Tuesday the allegations are all too familiar.

U.S. personnel “are engaging in abusive tactics on behalf of the Chinese,” she said Tuesday. When Uighur detainees refused to talk to Chinese interrogators in 2002, U.S. military personnel put them in solitary confinement as punishment, she said.

“Why are we doing China’s dirty work?” Manning said. “Surely we’re better than that.”