Bankers Indicted

The New York Times leads with the news that two former Credit Suisse brokers have been indicted on charges of securities fraud. In what U.S. prosecutors called a $1 billion bait-and-switch, one of the accused, Eric Butler, sold customers “some of the most toxic investments of the subprime age—collateralized debt obligations”—even as he passed the securities off as tied to safe student loans. Butler and his former colleague Julian Tzolov face up to 65 years in jail if convicted, though Butler at least continues to protest his innocence with his lawyer, contending he “believed he was doing the best for his clients.” Tzolov seems less convinced. He has fled the country and is believed to be in Bulgaria.

Still on the crime beat, the Wall Street Journal reports that a former Halliburton executive yesterday pleaded guilty to arranging some $180 million in bribes to senior Nigerian government officials to help secure a contract to build a liquefied-natural-gas plant. At the time, Albert Stanley was chief executive of Halliburton subsidiary KBR (the company has since sold the unit). Halliburton cut off all ties to Stanley after evidence surfaced that he was “secretly enriching himself by as much as $5 million in the payment and kickback scheme,” writes the NYT.

The Financial Times reports that BP appears to have salvaged its stake in TNK-BP, its “most important international venture” and the third-largest oil company in Russia. BP had been embroiled in a power struggle with its Russian partners that bore all the hallmarks of a state campaign to strong-arm foreign oil contracts. Under the terms of the new deal, BP will retain its 50 percent ownership stake in TNK-BP but will agree to an initial public offering of up to 20 percent of a subsidiary of the company. This allows BP’s Russian oligarch partners the opportunity “to sell at least part of their stake in the joint venture for a full market value,” notes the FT.

Boeing’s largest labor union voted overwhelmingly to strike on Wednesday, but not just yet. NYT reports the aircraft builder won an extra 48 hours of negotiating time with the union to try to hammer out a new contract for 27,000 of its employees. Boeing may have won a brief reprieve—crucially, it keeps development work of the 787 Dreamliner on track—but “it likely heightens pressure on Boeing to meet the union’s demand for a better offer on wages, pensions and job security.” The union is already heaping pressure on Boeing brass. “They’ve got 48 hours to bring a deal that’s acceptable to you or it’s on,” WSJ quoted union representative Mark Blondin as saying. The two sides are still very apart on health care costs, wage rises, and pensions, the newspaper adds. Boeing’s “best and final” proposal included a wage rise that averages 11 percent, bonuses of at least $5,000, and a 3 percent cost-of-living adjustment. The machinists were unimpressed; 87 percent voted to reject the deal and strike. The Associated Press reports early Thursday morning that the two sides will meet again on Thursday, this time with a federal mediator present.

Boeing’s labor strife comes at uncertain times for the whole of the airline industry. Trade group the International Air Transport Association warned that  airlines are set to lose $9.3 billion over the next two years, the Guardian reports, “as a ‘toxic combination’ of high fuel costs and dwindling demand ravages their finances.”

The outlook isn’t much better in the auto industry. Domestic auto sales fell a staggering 15.5 percent in August, “the fifth consecutive month of double-digit declines,” the NYT reports. Hit particularly hard were gas-guzzling pickups and SUVs, despite “some of the largest discounts ever offered,” the newspaper adds. According to BusinessWeek, Nissan was the lone carmaker to post a monthly sales increase. The traditional Big Three—General Motors, Ford, and Chrysler—saw monthly sales declines of 20.3 percent, 26.5 percent, and 34.5 percent respectively. For GM, this is the longest sales slump—10 consecutive months of declines—since the 2001 recession, Reuters reports. Amid the wreckage, there was some reason for optimism: GM and Ford shares actually nudged higher Thursday as the companies hinted that sales declines have hit bottom, Reuters adds.

The auto industry’s woes appear to have claimed a mighty big scalp. Stephen A. Feinberg, whose investment fund Cerberus Capital Management has made massive bets on the recovery of Chrysler and GM’s financing arm, GMAC, over the years, is now “ racing to salvage multibillion-dollar investments” in the two troubled outfits, the NYT reports. A key development for the fortunes of Feinberg and the U.S. auto industry is a potential $50 billion federal loan proposal. BusinessWeek reports auto execs have been lobbying at both the Democratic and Republican national conventions over the past two weeks “to speed up funding for $25 billion in subsidized loans to help retool their old plants. Given the industry’s deteriorating state, they now say they need an extra $25 billion, all to be lent at low rates of 5% or so.”